TIDMHLMA
RNS Number : 0608P
Halma PLC
16 June 2022
HALMA plc
FULL YEAR RESULTS 2022
Record profit for 19(th) consecutive year
Halma, the global group of life-saving technology companies
focused on growing a safer, cleaner and healthier future for
everyone, every day, today announces its full year results for the
12 months to 31 March 2022.
Highlights
Change 2022 2021
Revenue +16% GBP1,525.3m GBP1,318.2m
Adjusted Profit before Taxation(1) +14% GBP316.2m GBP278.3m
Adjusted Earnings per Share(2) +12% 65.48p 58.67p
Statutory Profit before Taxation +20% GBP304.4m GBP252.9m
Statutory Basic Earnings per Share +20% 64.54p 53.61p
Total Dividend per Share(3) +7% 18.88p 17.65p
Return on Sales(4) 20.7% 21.1%
Return on Total Invested Capital(5) 14.6% 14.4%
Net Debt GBP274.8m GBP256.2m
-- Record revenue, up 16%, and 17% on an organic constant currency(6) basis.
-- 19(th) consecutive year of record profit: Adjusted(1) Profit
before Taxation up 14%; 15% on an organic constant currency(6)
basis
-- Statutory Profit before Taxation up 20%; includes a GBP34.0m
gain on the Texecom disposal.
-- Strong organic constant currency(6) revenue and profit growth
in all three sectors and all major regions.
-- Continued strong returns: Return on Sales(4) of 20.7% and ROTIC(5) of 14.6%
-- Substantially increased strategic investment to support our future growth:
o R&D expenditure up 21%, representing 5.6% of revenue
o 13 acquisitions completed in the year for a total maximum
consideration of GBP164m; one further acquisition completed since
the period end for GBP37m; a healthy acquisition pipeline across
all sectors.
-- Solid cash conversion of 84% and a strong balance sheet, with
net debt/EBITDA of 0.74x (2021: 0.76x), supporting investment in
organic growth and acquisitions.
-- Total dividend per share for the year up 7%; 43(rd)
consecutive year of dividend growth of 5% or more.
Andrew Williams, Group Chief Executive of Halma, commented:
"This was a year of notable achievements for Halma, with revenue
exceeding GBP1.5bn and profit GBP300m for the first time. We
delivered our 19(th) consecutive year of record profit, and our
43(rd) consecutive year of dividend growth of 5% or more, while
substantially increasing strategic investment including further
strengthening our leadership, teams and culture to support our
future growth.
Halma's Sustainable Growth Model enabled our companies to act
with agility to address new market opportunities and to respond
rapidly to the multiple operational and economic challenges they
faced during the year. Our strong performance reflects huge credit
on the dedication of our people across the business, and was
underpinned by our empowering purpose and culture, our focus on
niche markets with long-term, fundamental growth drivers and the
high value of the solutions we provide to our customers.
We have made a positive start to the new financial year. We have
a strong order book, and order intake in the year to date is ahead
of revenue and in line with the very strong intake in the same
period of the prior year. We expect to deliver continued growth and
maintain high returns in the 2022/23 financial year, with good
single digit percentage organic constant currency revenue growth
and a Return on Sales similar to the second half of the 2021/22
financial year. We are well positioned to make further progress in
the full year and in the longer-term."
Notes:
1 Adjusted to remove the amortisation of acquired intangible
assets, acquisition items and profit or loss on disposal of
operations, totalling GBP11.8m (2020/21: GBP25.4m). See note
1 to the Results for details.
2 Adjusted to remove the amortisation of acquired intangible
assets, acquisition items, profit or loss on disposal of operations
and the associated taxation thereon and, in 2022, the increase
in the UK's corporation tax rate from 19% to 25%. See note
2 to the Results for details.
3 Total dividend paid and proposed per share, comprising interim
dividend of 7.35p per share and proposed final dividend of
11.53p per share.
4 Return on Sales is defined as adjusted(1) profit before taxation
from continuing operations expressed as a percentage of revenue
from continuing operations
5 Return on Total Invested Capital (ROTIC) is defined as post-tax
Adjusted(1) Profit as a percentage of average Total Invested
Capital.
6 Organic constant currency measures exclude the effect of movements
in foreign exchange rates on the translation of revenue and
profit(1) into Sterling, as well as acquisitions in the year
following completion and disposals.
7 Adjusted(1) Profit before Taxation, Adjusted(2) Earnings per
Share, organic growth rates, Return on Sales and ROTIC are
alternative performance measures used by management. See notes
1, 2 and 3 to the Results for details.
For further information, please contact:
Halma plc
Andrew Williams, Group Chief
Executive
Marc Ronchetti, Chief Financial +44 (0)1494 721 111
Officer
Charles King, Head of Investor
Relations
Clayton Hirst, Director of +44 (0)7776 685948
Corporate Affairs +44 (0)7834 796 013
MHP Communications
Andrew Jaques/Rachel Farrington +44 (0)20 3128 8404
A copy of this announcement, together with other information
about Halma, may be viewed on its website: www.halma.com . The
webcast of the results presentation will be available on the
Halma website later today: www.halma.com
NOTE TO EDITORS
1. Halma is a global group of life-saving technology companies,
focused on growing a safer, cleaner and healthier future for
everyone, every day. Its purpose defines the three broad market
areas where it operates:
Protecting life as populations grow and
* Safety protecting worker safety.
Addressing the impacts of climate change,
* Environment pollution and waste, protecting life-critical
resources and supporting scientific research.
Meeting rising healthcare demand as growing
* Medical populations age and lifestyles change.
Halma employs over 7,000 people in more than 20 countries,
with major operations in the UK, Mainland Europe, the USA and
Asia Pacific. Halma is listed on the London Stock Exchange
(LON: HLMA) and is a constituent of the FTSE 100 index.
In January 2022, Halma was named one of Britain's Most Admired
Companies by Management Today.
2. You can view or download copies of this announcement and the
latest Half Year and Annual Reports from the website at www.halma.com
or request free printed copies by contacting halma@halma.com
.
3. This announcement contains certain forward-looking statements
which have been made by the Directors in good faith using information
available up until the date they approved the announcement.
Forward-looking statements should be regarded with caution
as by their nature such statements involve risk and uncertainties
relating to events and circumstances that may occur in the
future. Actual results may differ from those expressed in such
statements, depending on the outcome of these uncertain future
events .
Strategic Report
A year of notable achievements
This has been a year of notable achievements for Halma. We
delivered record profit for the 19th consecutive year, our revenue
exceeded GBP1.5 billion and profit GBP300 million for the first
time, and our companies successfully addressed multiple economic
and geopolitical challenges including the ongoing effects of the
COVID pandemic and more recently the conflict in Ukraine. At the
same time, we substantially increased investment in our digital and
innovation activities while also making further progress on our Key
Sustainability Objectives.
Our achievements reflect the relevance of our purpose in
addressing our customers' needs and consequently many key
challenges facing our planet and society. They were enabled by
Halma's Sustainable Growth Model, built on a culture and
organisational model which allows our companies to respond with
agility to changes in their markets and the wider world.
However, all of this is brought to life through the commitment
of our employees worldwide who rose to the challenges and lived
Halma's purpose of growing a safer, cleaner, healthier future for
everyone, every day. I would like to thank them for their
dedication and their contributions over the past year.
A strong financial performance
Revenue grew by 16% to GBP1,525.3m and Adjusted(1) profit before
taxation increased by 14% to GBP316.2m. Statutory profit before
taxation increased by 20% to GBP304.4m.
Growth was broadly spread across our sectors, regions and
companies. All sectors delivered double digit rates of revenue and
profit growth on an organic constant currency basis. There was
double digit organic constant currency revenue growth in all major
regions, and approximately 80% of our companies delivered double
digit organic constant currency revenue growth.
Returns remained strong, with Return on Sales(1) well within our
target range of 18-22% and Return on Total Invested Capital over
double our estimated weighted average cost of capital of 7.1%. Cash
conversion was solid, which reflected strong underlying cash
generation and working capital control, but also the effect of some
selective working capital investment to support the strong growth
in the period. Our continued cash generation and strong balance
sheet underpin our investment in future organic growth, as well as
providing capacity to fund acquisitions and our progressive
dividend policy.
The Board is recommending a 7% increase in the final dividend to
11.53p per share (2021: 10.78p per share). Together with the 7.35p
per share interim dividend, this would result in a total dividend
for the year of 18.88p (2021: 17.65p), up 7%, making this the 43rd
consecutive year of dividend per share growth of 5% or more.
Organisational model and DNA enable our strong performance
Our Sustainable Growth Model, and in particular our
organisational model and our DNA, have been critical in delivering
our strong performance this year.
At its core is our purpose, which not only continues to motivate
us, as demonstrated by our high employee engagement scores, but is
also proving to be an important asset in attracting new talent.
Our organisational model gives our companies the resources,
agility and authority to respond to changes in their markets and
the global operating environment, led by their local management
team. It also has inherent scalability, allowing us to use M&A
to expand our opportunities for growth, without adding further
complexity to our structures and decision making or to divest when
growth opportunities become more limited. As we have grown, we have
deliberately developed a more collaborative culture. This has
allowed our companies to address opportunities and solve common
issues together, benefiting from the Group's increasing scale,
while still retaining the advantages of being small, agile
companies, close to their markets. This has been crucial during the
COVID pandemic and will continue to be so as we address the further
opportunities and challenges ahead.
Our organisational design and DNA means that companies have
short spans of control and the autonomy to act in their best
interests without seeking approval first. A good example of this in
action has been the different actions they have taken to address
the wide range of operational challenges they have faced during the
past year. These include:
- introducing radically different shift patterns and increasing
employee engagement in response to increased demand and labour
market shortages, which has also added capacity and flexibility for
further growth;
- collaborating to source alternative supplies, share component
inventories or leverage the Group's scale to address shortages and
delays of critical components in supply chains;
- rapidly redesigning products to use alternative components or
making components themselves, using
cross-functional groups to achieve fast times to market; and
- leveraging their close relationships with their customers to
ensure that we continue to deliver value to them as well as to
address increasing costs by price changes.
Increased strategic investment to support future growth
One of Halma's key strengths is the ability to deliver strong
performance in the shorter-term, while simultaneously making
substantial investments to support sustainable growth over the
longer-term.
We invested over a quarter of a billion pounds in aggregate in
this financial year. This investment broadened our opportunities
for growth both organically and through acquisition, ensured our
products continue to create value for our customers and further
strengthened our infrastructure across the Group.
Increasing these investments reflects our confidence in the
long-term growth drivers we see in our markets. Our products and
services have never been more relevant than today, as health,
safety and environmental regulations continue to increase, demand
for healthcare grows and the world addresses expanding demands on
life-critical resources including the urgent need to tackle climate
change, waste and pollution.
Increased strategic investment in new products and
technology
Our companies increased investment in new product development
above the rate of revenue growth, reflecting their own confidence
in their long-term growth prospects. R&D expenditure grew by
GBP15m to GBP85m, which represented 5.6% of revenue, up from 5.3%
in the prior year.
Investment in our technology infrastructure was GBP11m, to
support future growth and modernise ways of working across Halma.
We are upgrading our operational technologies to simplify the way
in which central functions collect the data required from our
companies' systems, with the objectives of increasing automation,
improving accuracy and control, and facilitating deeper data
insights. We are largely complete in the rollout of our global
Treasury Management solution and have commenced implementation of
our new Finance and Talent Management platforms. We are also
investing significantly in upgrading our global security
architecture, which has already brought the added benefits of more
secure connectivity between our companies and locations. We are
assisting each of our companies in considering how their core
business opportunities and challenges can be addressed through
improved technology solutions.
Our Digital and Technology teams have been active in supporting
the advancement of digital solutions across our companies' product
portfolios. Revenue from digital products and solutions increased
by 15% in the year, and represents over 40% of Group revenue, with
revenue from IoT solutions and from software and services both up
by more than 40% year-on-year.
We are making steady progress in establishing a common
technology core to support our ongoing IoT product development,
with companies trialling a number of potential solutions addressing
areas such as telemedicine, fire detection, and critical asset
tracking and management.
As our companies increasingly incorporate connected technologies
into their products, we are helping to accelerate their IoT /
digital product development through a number of initiatives.
Examples include diagnostic and design clinics which help companies
devise their digital solutions; digital incubators to help
companies rapidly prototype and test their new concepts; and
strategic partnerships with third-party digital technology
platforms and software development partners to assist companies in
scaling and launching products to market.
These activities were supported by a range of initiatives which
encourage collaboration and by our innovation network. They
included an Innovation & Digital Summit, which brought together
over 100 participants from across the Group to share their
experiences and learn from external experts, a regular Innovation
& Digital newsletter, and the release of a self-learning
resource through our Innovation & Digital Champions
Network.
13 acquisitions completed across all three sectors
Our M&A strategy is focused on acquiring businesses with
valuable intellectual property, which operate in market niches
aligned with our purpose of growing a safer, cleaner, healthier
future for everyone, every day.
Our lean organisational model is scalable and gives us the
ability to continue acquiring small-to-medium sized businesses to
add new capabilities and supplement our underlying organic
growth.
We are also able to sell and merge businesses relatively easily
should market dynamics change, enabling us to maintain a
purpose-driven, growth-oriented portfolio without it becoming
significantly more complex to manage. The benefit of this active
portfolio management is reflected in the number of companies within
Halma remaining relatively stable, whilst we have grown and
maximised value for our shareholders. For example, in 2012, Halma
had revenue of GBP580m from 38 operating companies, and today we
are delivering revenue of over GBP1.5bn from only 44 operating
companies.
We made 13 acquisitions in the year, for a maximum total
consideration of GBP164m, while disposing of one business for
GBP65m. The acquisitions were spread across our three sectors, with
five acquisitions each in the Environmental & Analysis and
Medical sectors and three in the Safety sector. They were broadly
spread geographically, with acquisitions made in the UK, the USA, a
number of countries in Mainland Europe, and in Australia.
It is particularly pleasing to see the acquisition momentum in
the Environmental & Analysis sector increasing, following the
formation of the new sector leadership team at the beginning of the
year including a dedicated M&A team.
Three of the acquisitions made in the year will be standalone
companies within the Group. They are:
- PeriGen, Inc., whose advanced technology protects mothers and
their unborn babies during childbirth by alerting doctors, midwives
and nurses to potential problems. PeriGen was acquired for a cash
consideration of US$57.3m (approximately GBP40.1m) on a cash and
debt-free basis;
- The Ramtech group of companies, a UK-based supplier of
wireless fire systems for temporary sites, which was purchased for
a cash consideration of GBP15.7m, on a cash and debt-free basis;
and
- Sensitron S.r.L., an Italian gas detection company, which was
acquired for a cash consideration of EUR20.1m (GBP17.1m), on a cash
and debt-free basis.
An increasing number of our companies now have the size and
capability to grow their businesses through acquisition as well as
organically, and 10 of the acquisitions in the year were made by
our companies as bolt-ons to enhance their technologies and market
reach. Details of these transactions are contained in the notes to
the Accounts.
Since the period end, we have acquired Deep Trekker, a
market-leading manufacturer of remotely operated underwater robots
used for inspection, surveying, analysis and maintenance. It will
be a stand-alone company within our Environmental & Analysis
sector. It serves markets including aquaculture, renewable energy
and ocean science and research, and was acquired for a cash
consideration of C$60m (approximately GBP36.6m) on a cash and
debt-free basis.
We have also continued to develop our external partnerships
through our Halma Ventures programme, that offers Halma access to
new technology and capabilities via minority ownership, and have a
good pipeline of further potential opportunities. Since the year
end, we have made one further investment in VAPAR, whose AI
technology enables faster and more accurate condition assessment of
wastewater infrastructure.
Talent and Executive Board changes
The quality and diversity of our leaders and teams is a critical
component of Halma's success, and their continued commitment to
bringing our purpose to life was reflected in our global engagement
survey. This had a high response rate of 85% and an engagement
score of 76%, with improvements across all dimensions compared to
2020. This result was supported by the ability of our companies to
act quickly to look after their employees' wellbeing in response to
events such as the ongoing pandemic and the invasion of
Ukraine.
We are committed to maximising the quality of talent available
to us by ensuring that Halma is an inclusive organisation, thereby
also ensuring a diversity of voices and experiences within our
leadership teams.
Diversity, Equity and Inclusion is one of our Key Sustainability
Objectives, and one measure of inclusion is gender diversity. We
have introduced a target of achieving 40-60% gender balance on all
company boards by March 2024. Although this is a stretching goal,
we made progress towards it in the year, increasing female
representation from 22% last year to 26% at 31 March 2022.
We manage the development and diversity of our leadership teams
to ensure that we have robust succession plans for senior positions
within the Group and that we have the appropriate capabilities in
our teams to support the Group's future growth.
Since the beginning of the year, we have been operating and
reporting as three sectors, to better align with our purpose and
our focus on safety, health and environmental markets. Each sector
team includes a Sector Chief Executive, a Chief Financial Officer,
a team to support M&A activity as well as legal and talent
management resource, to deliver its growth strategy.
The new dedicated sector team created for the Environmental
& Analysis sector has brought increased focus on the
significant opportunities we see in its markets. Its new M&A
team, for example, has already benefited the sector, with five
acquisitions completed in the year, and Deep Trekker acquired after
the year end.
We are also investing in our leadership team in Asia-Pacific,
reflecting the substantial organic and inorganic growth potential
in the region over the longer term. This team is led by Aldous
Wong, who was one of our Divisional Chief Executives (DCEs), as
President of Halma Asia Pacific and an advisor to Halma's Executive
Board. We made one further change to the Executive Board in the
year, with Steve Brown also being promoted from DCE to succeed
Laura Stoltenberg as the Sector Chief Executive for the Medical
sector.
Good progress on our Key Sustainability Objectives
Following the introduction of our Sustainability Framework in
the prior year, each of our companies is creating its own plan to
set out how they will contribute to the Group's goals and ambitions
for our Key Sustainability Objectives (KSOs) - Climate Change,
Diversity, Equity and Inclusion (DEI), and Circular Economy.
Achieving these objectives will add to the positive impact
delivered through our purpose-aligned growth.
In addition, we advanced our work to enable us to report against
the recommendations from the Task Force for Climate-related
Financial Disclosures (TCFD). This further highlighted not only the
challenges but also the significant opportunities for Halma arising
from the transition to a lower carbon world and from global efforts
to address climate change. The ways in which our companies can
address these opportunities are diverse. These include solutions to
reduce greenhouse gas (GHG) emissions; helping customers in
energy-transitioning industries to increase safety and reduce
costs; providing products with a lower carbon footprint; and
helping customers and societies adapt to the worsening physical
impacts of climate change. We will be supporting our companies in
identifying and assessing relevant opportunities as part of their
strategic growth plans, as well as continuing to assess these
opportunities as part of our M&A strategy.
We have several targets already in place for our Climate Change
KSO. We have made progress towards our 2040 Net Zero and 2030 1.5
degree aligned targets for Scope 1 & 2 emissions, with a 35%
reduction in GHG emissions from our 2020 baseline, compared to 14%
reported revenue growth over those two years. We have rapidly
increased our use of renewable electricity from 8% of consumption
in 2020 to 42% in 2022, which is on the way to our target of 80%
renewable electricity by 2025. From FY23, we have also introduced a
new target of at least 4% annual growth in energy productivity to
support our Scope 1 & 2 goals.
We recognise that Scope 1 & 2 is only a small portion of our
total carbon footprint and that we need to work towards Net Zero
for our entire value chain. We have made progress during the year
in estimating our full Scope 3 footprint. We will be looking to
show strong progress towards setting appropriate Scope 3 goals and
targets during the coming financial year.
Our new annual energy productivity metrics have been
incorporated into our executive remuneration for FY23, alongside
the gender diversity targets mentioned above. Performance against
stretching annual targets is required for participants to achieve
10% of the maximum annual bonus. We consider this change in our
remuneration as a good starting point; in the future we will
consider further metrics as well as evolving the scope and type of
sustainability-linked remuneration.
Summary and Outlook
Halma's Sustainable Growth Model enabled our companies to act
with agility to address new market opportunities and to respond
rapidly to the multiple operational and economic challenges they
faced during the year. Our strong performance reflects huge credit
on the dedication of our people across the business, and was
underpinned by our empowering purpose and culture, our focus on
niche markets with long-term, fundamental growth drivers and the
high value of the solutions we provide to our customers.
We have made a positive start to the new financial year. We have
a strong order book, and order intake in the year to date is ahead
of revenue and in line with the very strong intake in the same
period of the prior year. We expect to deliver continued growth and
maintain high returns in the 2022/23 financial year, with good
single digit percentage organic constant currency revenue growth
and a Return on Sales similar to the second half of the 2021/22
financial year. We are well positioned to make further progress in
the full year and in the longer-term.
Andrew Williams
Group Chief Executive
(1) See Highlights
Financial Review
Record profit
Halma reported a strong financial performance in the period. We
delivered record profit for the 19th consecutive year, while
substantially increasing investment to support future growth. Our
Sustainable Growth Model enabled our companies to respond with
agility to new opportunities in their end markets and to benefit
from recovery in a number of markets that had been affected by the
COVID pandemic. It also allowed them to act rapidly to address
multiple economic and geopolitical challenges including the ongoing
effects of the pandemic and, in the fourth quarter of the year,
from the conflict in Ukraine. The increased investment in the year
was supported by the continued strength of our financial position
and solid cash flow, and will underpin our growth over the longer
term as our companies address the significant opportunities in
their markets.
Revenue for the year to 31 March 2022 was GBP1,525.3m (2021:
GBP1,318.2m), up 15.7%, which principally reflected a strong
organic performance. There was also a benefit from recent
acquisitions (net of the effect of a disposal in the year), and a
negative effect from currency translation. The increase in
Adjusted(1) profit before taxation of 13.6% to GBP316.2m (2021:
GBP278.3m) reflected the increase in revenue and the return of
discretionary variable overhead costs in the second half of the
year as the effects of the pandemic eased. It also included a net
benefit of GBP3m, comprising a GBP5m release of a centrally-held
provision for the risk of customer bad debt as a result of the
COVID pandemic, offset in part by an increase of GBP2m in
provisions in relation to bad debt and contract risk relating to
our decision to cease trading with Russia. As a result of the
continued strong performance, we were able to increase investment
to support future growth, including further resources for our
central Growth Enabler teams, and GBP7m increase in expenditure to
upgrade our information technology infrastructure. Statutory profit
before taxation increased by 20.4% to GBP304.4m (2021:
GBP252.9m).
Revenue growth of 15.7% was driven by a 17.4% increase in
organic constant currency revenue. The contribution from
acquisitions was a positive 4.8% (1.6% net of disposals), and there
was a negative effect from currency translation of 3.3%. The 13.6%
increase in Adjusted(1) profit comprised a 15.4% increase in
organic constant currency profit, a 3.6% contribution from
acquisitions (1.7% net of disposals), and a negative effect from
currency of 3.5%.
Statutory profit before taxation of GBP304.4m is calculated
after charging the amortisation of acquired intangible assets of
GBP42.7m (2021: GBP42.3m), a GBP34.0m gain on disposals (2021:
GBP22.1m), and other items of a net GBP3.1m (2021: GBP5.2m).
Further detail on these items is given in note 1 to these
Accounts.
Cash conversion was solid at 84%, reflecting good underlying
working capital control, partially offset by selective investment
by our companies in their stock of components and raw materials to
ensure continuity of production and to manage price increases. Our
financial position remained strong, despite significant organic
investment and acquisition spend, with net debt (on an IFRS 16
basis which includes lease commitments) increasing by only GBP18.6m
to GBP274.8m, and representing gearing (net debt to EBITDA) of 0.74
times.
Strong revenue and profit performance
Revenue grew by 19.2% in the first half of the year and by 12.6%
in the second half, with second half revenue 6.9% higher than
revenue in the first. Constant currency organic revenue increased
by 17.4%, comprising a 23.2% increase in the first half and growth
of 12.2% in the second half. There was a negative effect of 6.2%
from currency translation in the first half, and of 0.7% in the
second half, giving a negative effect of 3.3% for the year as a
whole.
Adjusted(1) profit increased by 27.0% in the first half and grew
by 3.2% in the second half. This resulted in a first half/second
half split of adjusted profit of 49%/51%, compared to our typical
45%/55% pattern. Organic profit at constant currency increased by
31.7% in the first half, and by 2.6% in the second half, resulting
in growth of 15.4% for the year. Growth in the second half of the
year included an investment of GBP6m in information technology
infrastructure (out of GBP7m in the year as a whole), and a net
GBP3m benefit from the release of provisions relating to the risk
of customer bad debt and our decision this year to cease trading
with Russia as described above.
Revenue and profit change
---------------------------------------------------------------------------------------------
Organic Organic
2022 2021 Change Total growth(2) growth(2)
at constant
currency
GBPm GBPm GBPm % % %
-------------------- -------- -------- -------- ------- ------------ --------------
Revenue 1,525.3 1,318.2 207.1 15.7 14.1 17.4
-------------------- -------- -------- -------- ------- ------------ --------------
Adjusted(1) profit
before taxation 316.2 278.3 37.9 13.6 11.9 15.4
Statutory profit
before taxation 304.4 252.9 51.5 20.4 - -
-------------------- -------- -------- -------- ------- ------------ --------------
(1) In addition to those figures reported under IFRS, Halma uses
alternative performance measures as key performance indicators, as
management believe these measures enable them to better assess the
underlying trading performance of the business by removing
non-trading items that are not closely related to the Group's
trading or operating cash flows. Adjusted profit excludes the
amortisation and impairment of acquired intangible assets;
acquisition items; restructuring costs and profit or loss on
disposal of operations. All of these are included in the statutory
figures. Notes 1 and 3 to the Accounts give further details with
the calculation and reconciliation of adjusted figures.
(2) See Highlights.
Strong revenue and profit growth in all sectors
All sectors delivered strong revenue and profit growth, both on
a reported and organic constant currency basis, and all sectors
grew revenue and profit in both the first half and the second half
of the year.
The Environmental & Analysis sector delivered the strongest
performance. Revenue increased 22.6% driven by strong organic
constant currency growth of 24.5%, with all regions reporting
growth on an organic constant currency basis. Profit grew 23.0%, or
by 23.3% on an organic constant currency basis. The sector's strong
revenue growth principally reflected a recovery in customer demand,
including a number of larger contracts, as the effects of the COVID
pandemic eased, and its operational agility in spite of supply
chain disruptions. Acquisitions, net of disposals, contributed
growth of 1.6% to revenue, and 3.5% to profit. Return on Sales was
marginally higher at 24.8% (2021: 24.7%). There was a reduction in
gross margin as a result of product mix, in addition to increased
sector costs following the creation of a new dedicated sector
leadership team (rather than one shared with the Medical sector, as
in the previous year). These factors were mitigated by continued
strong overhead control. Absolute expenditure on R&D increased
to GBP22.8m (2021: GBP20.6m) although that represented a reduction
in R&D expenditure as a percentage of sales from 5.7% to 5.1%.
Looking ahead, while there are continued risks from supply chain
disruptions and a robust comparative (notably in the first half),
we expect the sector to make further strong progress, supported by
a substantial order book and a contribution from recent
acquisitions.
The Medical sector also grew strongly, with revenue growth of
19.1%, including an organic constant currency increase of 13.0% and
a contribution from acquisitions of 10.1%. Growth was broad-based
across the sector, with the majority of companies delivering double
digit growth as a result of strong increases in customer demand as
the effects of the COVID pandemic abated and healthcare systems
began to normalise. This was partially offset by a small number of
companies which had seen significant increases in demand as a
result of the pandemic seeing a decline in sales. Profit grew 15.0%
(10.5% on an organic constant currency basis) and Return on Sales
was 22.5% (2021: 23.3%). This included a substantial increase in
R&D expenditure to GBP26.9m, representing 6.1% of revenue
(2021: GBP18.8m; 5.1% of revenue), given an intensification of new
product development and new product launches in the year. It also
reflected the allocation of the full cost of a dedicated sector
leadership team following the creation of a separate team for the
Environmental & Analysis sector. These effects were partly
offset by strong control of overheads. While risks remain of
further supply chain disruptions and delays to customer orders, the
sector is anticipated to deliver good growth in the year ahead,
supported by a strong order book.
The Safety sector also saw strong growth, with revenue
increasing by 15.9% on an organic constant currency basis. Reported
revenue growth was 9.3% and included negative effects of 5.2% from
the disposal of Texecom in the first half of the year and 2.7% from
foreign exchange translation, which were partly offset by a benefit
from recent acquisitions of 1.3%. Sector growth was driven by
double digit revenue growth in all but two (smaller) subsectors,
reflecting our companies' agility in responding to the recovery in
customer demand as the effects of the COVID pandemic eased, and was
achieved despite increased supply chain, logistics and labour
market disruption during the year. Profit increased 8.1%, or 13.3%
on an organic constant currency basis, and Return on Sales was
22.8% (2021: 23.0%), reflecting higher technology costs and an
increase in R&D spend to 5.6% of revenue (2021: 5.2%), partly
offset by strong overhead control and the effect of the disposal of
Texecom during the year. While there are risks from continued
inflationary, operational and supply chain challenges, the sector
is expected to deliver a strong organic constant currency
performance in the year ahead.
Central administration costs, which include our Growth Enabler
functions, increased to GBP30.9m. These had declined in 2021 to
GBP22.9m from GBP26.3m in 2020, as a result of the discretionary
cost reduction measures implemented at the beginning of the COVID
pandemic. The increase reflected the partial return of
discretionary variable overhead costs as our business activity
recovered, investment in our governance and compliance teams given
the increased scale of the Group and planned investment in
technology and our Growth Enabler teams to support our future
growth. In 2023, we expect the same factors, principally technology
investment, to result in central administration costs being
approximately GBP40m.
Sector revenue change
2022 2021
-------- --------- ------- ----------
% organic
% growth growth(2) at
% of constant
GBPm total GBPm % of total Change GBPm currency
------------------ -------- --------- -------- ------------- -------------- ------------- ----------------
Safety 641.4 42 587.0 45 54.4 9.3 15.9
------------------ -------- --------- -------- ------------- -------------- ------------- ----------------
Environmental &
Analysis 442.9 29 361.1 27 81.8 22.6 24.5
------------------ -------- --------- -------- ------------- -------------- ------------- ----------------
Medical 442.3 29 371.3 28 71.0 19.1 13.0
------------------ -------- --------- -------- ------------- -------------- ------------- ----------------
Inter-segment
sales (1.3) (1.2) (0.1)
------------------ -------- --------- -------- ------------- -------------- ------------- ----------------
1,525.3 100 1,318.2 100 207.1 15.7 17.4
------------------ -------- --------- -------- ------------- -------------- ------------- ----------------
Sector profit change
2022 2021
-------------------- --------------------
% organic
growth(2)
Change at constant
GBPm % of total GBPm % of total GBPm % growth currency
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
Safety 146.2 41 135.3 43 10.9 8.1 13.3
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
Environmental
& Analysis 109.8 31 89.3 29 20.5 23.0 23.3
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
Medical 99.5 28 86.6 28 12.9 15.0 10.5
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
Sector profit(3) 355.5 100 311.2 100 44.3
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
Central administration
costs (30.9) (22.9) (8.0)
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
Net finance expense (8.4) (10.0) 1.6
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
Adjusted(4) profit
before tax 316.2 278.3 37.9 13.6 15.4
------------------------ ------- ----------- ------- ----------- ------- --------- -------------
(3) Sector profit before allocation of adjustments. See Note 1
to the Financial Statements.
(4) Adjusted profit excludes the amortisation and impairment of
acquired intangible assets; acquisition items; restructuring costs;
and profit or loss on disposal of operations. All of these are
included in the statutory figures. Note 3 to the Financial
Statements gives further details with the calculation and
reconciliation of adjusted figures.
Strong revenue growth in all major regions
The Group's four major regions delivered a strong revenue
performance on a reported and organic constant currency basis, and
all of them grew on an organic constant currency basis.
Revenue in the USA increased by 17.4%, and the USA remains our
largest revenue destination, accounting for 39% of Group revenue,
the same as in the prior year. Organic constant currency revenue
grew by 19.8%. All sectors performed well, with the Environmental
& Analysis sector reporting very strong growth, driven by
Environmental Monitoring and Optical Analysis. The Safety sector
also performed strongly, with a recovery in customer demand
following the pandemic resulting in strong growth in a number of
subsectors including emergency communication in Elevator Safety,
Fire Detection, Pressure Management and Industrial Access Control.
The Medical sector performed well, with many companies seeing
substantial growth as elective procedure volumes increased,
together with a positive contribution from recent acquisitions,
principally PeriGen. This was partly offset, however, by a decline
in demand for products supporting the diagnosis or treatment of
COVID.
Mainland Europe revenue was 11.6% higher, or 12.8% on an organic
constant currency basis. Reported revenue included a modest
contribution from acquisitions (net of the impact of disposals),
and a negative effect from foreign exchange translation. The
Environmental & Analysis sector delivered a very strong
performance, driven by the Water Analysis and Treatment subsector
and also benefiting from the acquisition of Sensitron in the year.
Medical sector growth was also strong, reflecting momentum in the
Healthcare Assessment subsector. The Safety sector also performed
well, with strong performances in People and Vehicle Flow and Fire
Detection, although more mixed in the rest of the sector.
UK revenue was 25.0% higher, which included a small positive
contribution from acquisitions, including Static Systems and
Ramtech, net of the disposal of Texecom. Organic constant currency
revenue growth was 24.8%. The Medical sector saw strong organic
constant currency growth following a sharp decline in the prior
year as a result of the COVID-19 pandemic, and additionally
benefited from the acquisition of Static Systems in the year. The
Environmental & Analysis sector saw good growth, driven by
strong demand for pipeline inspection and maintenance solutions in
the Water Analysis and Treatment subsector and good momentum in gas
detection within Environmental Monitoring. Growth in the Safety
sector was strong, and reflected high rates of organic growth,
driven by a strong performance in Fire Detection, more than
compensating for the negative impact from the disposal.
Revenue from territories outside the UK/Mainland Europe/the USA
grew by 10.4%, in line with our 10% KPI growth target. This
comprised a strong performance in Asia Pacific and a small decline
in revenue in other regions.
Asia Pacific revenue increased 16.0%, or 18.3% on an organic
constant currency basis. Revenue in China, our largest market in
the region at approximately 7% of Group revenue, grew at a similar
rate to the Asia Pacific region overall. The Environmental &
Analysis and Medical sectors delivered strong performances,
supported by our companies' alignment with the major elements of
the Chinese government's Five Year Plan. Elsewhere in the region,
the other larger markets of Australasia, India, Japan, South Korea
and Singapore delivered double digit revenue growth, and, in the
smaller markets, only Malaysia and Indonesia saw a decline. The net
effect of acquisitions and disposals was broadly neutral.
Other regions, which represent less than 7% of Group revenue,
reported revenue 1.4% lower on a reported basis, principally as a
result of foreign exchange translation. There was a 2.1% increase
on an organic constant currency basis, which reflected modest
organic growth in Africa, Near and Middle East and a wide range of
performances in other countries. There was a strong performance in
the Environmental & Analysis sector and good growth in Medical,
while Safety sector revenue was lower.
Geographic revenue
2022 2021
------------------- -------------------
% of % of Change % organic growth at
GBPm total GBPm total GBPm % change constant currency
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
United States of
America 597.2 39 508.8 39 88.4 17.4 19.8
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
Mainland Europe 308.1 20 276.0 21 32.1 11.6 12.8
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
United Kingdom 267.0 18 213.6 16 53.4 25.0 24.8
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
Asia Pacific 250.8 16 216.1 16 34.7 16.0 18.3
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
Africa, Near and
Middle East 53.6 4 54.1 4 (0.5) (0.9) 3.0
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
Other countries 48.6 3 49.6 4 (1.0) (2.0) 1.2
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
1,525.3 100 1,318.2 100 207.1 15.7 17.4
--------------------- -------- --------- -------- --------- ------- ----------- -----------------------
Currency effects
Weighted average rates used in the Income Exchange rates used to translate the Balance
Statement Sheet
---------------------------------------------- ----------------------------------------------
2022 2021 2022 2021
First half Full year Full year Year end Year end
------ ----------- ---------------------- ---------------------- ---------------------- ----------------------
US$ 1.388 1.367 1.308 1.315 1.378
------- ----------- ---------------------- ---------------------- ---------------------- ----------------------
Euro 1.165 1.176 1.121 1.183 1.174
------- ----------- ---------------------- ---------------------- ---------------------- ----------------------
Continued high returns
Halma's Return on Sales (2) has exceeded 16% for 37 consecutive
years. Our KPI target is to deliver Return on Sales in the range of
18-22% and this year Return on Sales was 20.7%, or 20.5% when the
benefit of GBP3m from a net decrease in customer bad debt and
Russia-related provisions is excluded. This compares to an
unusually high level of 21.1% in 2021, which had benefited from the
stringent cost reduction measures we decided to take during the
COVID-19 pandemic.
We successfully achieved our objective of continuing to invest
in our businesses while delivering growth and we maintained a high
level of Return on Total Invested Capital (ROTIC) (2) , the
post-tax return on the Group's total assets including all
historical goodwill. This year, ROTIC increased to 14.6% (2021:
14.4%), with the change principally reflecting the higher level of
constant currency growth in the year, partially offset by the
negative effect of currency movements. Our ROTIC remains well ahead
of our KPI target of 12% and more than double Halma's Weighted
Average Cost of Capital (WACC), estimated to be 7.1% (2021:
6.7%).
Currency effects well managed
Halma reports its results in Sterling. Our other key trading
currencies are the US Dollar, Euro and to a lesser extent the Swiss
Franc, the Chinese Renminbi and the Australian Dollar. Over 46% of
Group revenue is denominated in US Dollars, approximately 28% in
Sterling and approximately 12% in Euros.
The Group has both translational and transactional currency
exposure. Translational exposures are not hedged. Transactional
exposures, after matching currency of revenue with currency costs
wherever practical, are hedged using forward exchange contracts for
a proportion (up to 75%) of the remaining forecast net transaction
flows where there is a reasonable certainty of an exposure. We
hedge up to 12 months forward.
Sterling strengthened on average in the year, principally in the
first half. This gave rise to a negative currency translation
impact of 3.3% on revenue and 3.5% on profit for the full year.
Based on the current mix of currency denominated revenue and
profit, a 1% movement in the US Dollar relative to Sterling changes
revenue by GBP7.1m and profit by GBP1.6m. Similarly, a 1% movement
in the Euro changes revenue by GBP1.8m and profit by GBP0.4m.
If currency rates for the financial year to the end of March
2023 were US Dollar 1.260/ Euro 1.190 relative to Sterling, and
assuming a constant mix of currency results, we would expect
approximately a GBP59m positive revenue and a GBP13m positive
profit impact compared to financial year to the end of March 2022,
with the majority of the impact in the first half of the year.
Financing cost decreased
The net financing cost in the Income Statement of GBP8.4m was
lower than the prior year (2021: GBP10.0m). This principally
reflected a lower weighted average interest rate in the year (see
the "Average debt and interest rates'" table below for more
information).
We expect the net financing cost for the 2023 financial year to
be approximately GBP14m, if no further acquisitions are made. This
reflects a forecast higher weighted average interest rate in the
year, following the completion of a new Private Placement issuance
(for details, see the "Substantial funding capacity and liquidity"
section below). This issuance results in an increased proportion of
fixed coupon debt on the Group's balance sheet, and secures debt
financing sufficient to meet the Group's likely medium-term
requirements.
The net pension financing impact under IAS 19 is included within
the net financing cost. This year the Group recognised a charge of
GBP0.3m (2021: gain of GBP0.1m).
Group tax rate increased
The Group has major operating subsidiaries in a number of
countries and the Group's effective tax rate is a blend of these
national tax rates applied to locally generated profits.
The Group's effective tax rate on adjusted profit was higher
than in the prior year at 21.6% (2021: 20.1%). This was mainly due
to changes in tax laws reducing the benefits from intra-group
financing arrangements. Based on the latest forecast mix of
adjusted profits for the year to 31 March 2023 we currently
anticipate the Group effective tax rate to be broadly stable at
approximately 22% of adjusted profits.
On 2 April 2019, the European Commission (EC) published its
final decision that the UK controlled Finance Company Partial
Exemption (FCPE) constituted State Aid. In common with many other
UK companies, Halma has benefited from the FCPE and had appealed
against the European Commission's decision, as had the UK
Government. The EU General Court delivered its decision on 8 June
2022. The ruling was in favour of the European Commission but the
UK Government and the taxpayer have the option to appeal this
decision. Following receipt of charging notices from HM Revenue
& Customs (HMRC) we made a payment in February 2021 of GBP13.9m
to HMRC in respect of tax, and in May 2021 made a further payment
of approximately GBP0.8m in respect of interest.
Whilst the EU General Court was in favour of the EC, our
assessment is that there are strong grounds for appeal and we would
expect such appeals to be successful. As a result we continue to
recognise a receivable of GBP14.7m in the balance sheet.
Solid cash generation
Cash generation is an important component of the Halma model,
underpinning further investment in organic growth, supporting
value-enhancing acquisitions and funding an increasing dividend to
shareholders.
Cash generated from operations was GBP293.4m (2021: GBP331.4m)
and adjusted operating cash flow, which excludes operating cash
adjusting items, and includes net cash capital expenditure, was
GBP273.2m (2021: GBP300.3m) which represented 84% (2021: 104%) of
adjusted operating profit. While this was below our cash conversion
KPI target of 90%, it included the impact of selective investment
by our companies in their stock of components and raw materials to
ensure continuity of production and manage price increases. This
had an impact on working capital, with an outflow of GBP62.7m,
comprising changes in inventory, receivables and creditors (2021:
inflow of GBP2.8m), which also reflected the strong revenue growth
in the period. These effects would have been more significant were
it not for the continued strong underlying control of working
capital by our companies. Adjusted operating cash flow is defined
in note 3 to the Accounts.
A summary of the year's cash flow is shown in the tables at the
end of this review. The largest outflows in the year were in
relation to acquisitions, dividends and taxation paid. Acquisition
of businesses including cash and debt acquired and fees increased
to GBP164.4m (2021: GBP48.8m), reflecting the higher levels of
M&A activity in the year. Dividends totalling GBP68.7m (2021:
GBP63.7m) were paid to shareholders in the year. Taxation paid
increased to GBP56.0m (2021: GBP53.8m).
Capital allocation and funding priorities
Halma aims to deliver high returns, measured by ROTIC(2), well
in excess of our cost of capital. We invest to deliver the future
earnings growth and strong cash returns which enable us to achieve
this aim on a sustainable basis, and our capital allocation
priorities remain as follows:
- Investment for organic growth: Organic growth is our first
priority and is driven by investment in our existing businesses,
including through capital expenditure, innovation in digital growth
and new products, international expansion and the development of
our people.
- Value-enhancing acquisitions: We supplement organic growth
with acquisitions in current and adjacent market niches, aligned
with our purpose. This brings new technology, intellectual property
and talent into the Group and expands our market reach, keeping
Halma well-positioned in growing markets over the long term.
- Regular and increasing returns to shareholders: We have
maintained a progressive dividend policy for over 40 years and this
is our preferred route for delivering regular cash returns to
shareholders without impacting on our investment to grow our
business.
Continued investment for organic growth
All sectors continue to innovate and invest in new products,
with R&D spend determined by each individual Halma company.
R&D expenditure as a percentage of revenue remained well above
our KPI target of 4% at 5.6% (2021: 5.3%). In absolute terms, this
meant that R&D expenditure increased by 21% to GBP85.4m (2021:
GBP70.3m), which was ahead of revenue growth. This increasing
investment reflects our companies' confidence in the growth
prospects of their respective markets. In the medium term we expect
R&D expenditure to continue to increase broadly in line with
revenue growth.
Under IFRS accounting rules we are required to capitalise
certain development projects and amortise the cost over an
appropriate period, which we determine as three years. This year we
capitalised GBP13.4m (2021: GBP15.4m), impaired GBP2.9m (2021:
GBP1.9m) and amortised GBP7.0m (2021: GBP7.9m). The closing
intangible asset carried on the Consolidated Balance Sheet, after a
GBP1.3m gain (2021: GBP2.0m loss) relating to foreign exchange was
GBP41.7m (2021: GBP38.9m). All R&D projects, and particularly
those requiring capitalisation, are subject to rigorous review and
approval processes by the relevant sector board.
Capital expenditure on property, plant, equipment and vehicles,
computer software and other intangible assets was GBP26.6m (2021:
GBP26.4m), with both years reflecting a lower spend as a result of
pandemic constraints. Expenditure was principally on plant,
equipment and vehicles. We anticipate capital expenditure to
increase to approximately GBP34m in the coming year, reflecting
investment in the expansion of manufacturing facilities and
automation to support future growth.
We are also investing in automation and technology upgrades.
Technology spend totalled GBP11m in the 2022 financial year,
reflecting increased investment of GBP7m, and we expect expenditure
in the financial year ending 31 March 2023 to be approximately
GBP20m. This Group-wide investment includes enhanced security,
improved data and analytics capabilities and support for our
companies in upgrading their operating technology and creating new
digital models in line with our Halma 4.0 growth strategy.
Lease right-of-use asset additions were GBP23.0m (2021:
GBP24.3m). This included additions of GBP4.6m as a result of
acquisitions made in the year, and the commencement of new leases
and extensions or renewals of existing leases.
Value-enhancing acquisitions and investments
Acquisitions and disposals are a key component of our
sustainable growth strategy, as they keep our portfolio of
companies focused on markets which have strong growth opportunities
over the medium and long term.
In the year we made 13 acquisitions at a cost of GBP154.3m (net
of cash acquired of GBP18.2m and including acquisition costs). In
addition, we paid GBP14.2m in contingent consideration and other
payments for acquisitions made in prior years, giving a total spend
of GBP168.5m. We also divested Texecom Limited, for GBP62.0m, net
of disposal costs.
The acquisitions completed in the current and prior year
contributed to revenue this year in line with expectations overall,
and we expect a good performance from these acquisitions in the
future.
Details of the acquisitions and investments made in the year are
given in the sector reviews in the Annual Report and Accounts 2022
and in note 8 to the Financial Statements.
Since the year end, we have made one further acquisition, of
Deep Trekker, a market-leading manufacturer of remotely operated
underwater robots used for inspection, surveying, analysis and
maintenance, for a cash consideration of C$60m (approximately
GBP36.6m), on a cash and debt-free basis.
Regular and increasing returns for shareholders
Adjusted earnings per share increased by 11.6% to 65.48p (2021:
58.67p) and statutory basic earnings per share, which included a
gain on disposal of Texecom Limited, increased by 20.4% to 64.54p
(2021: 53.61p).
The Board is recommending a 7.0% increase in the final dividend
to 11.53p per share (2021: 10.78p per share), which together with
the 7.35p per share interim dividend gives a total dividend per
share of 18.88p (2021: 17.65p), up 7.0% in total.
Dividend cover (the ratio of adjusted profit after tax to
dividends paid and proposed) is 3.47 times (2021: 3.33 times).
The final dividend for the financial year ended March 2022 is
subject to approval by shareholders at the AGM on 21 July 2022 and,
if approved, will be paid on 18 August 2022 to shareholders on the
register at 15 July 2022.
We aim to increase dividends per share each year, while
maintaining a prudent level of dividend cover, and declare
approximately 35-40% of the anticipated total dividend as an
interim dividend. The Board's determination of the proposed final
dividend increase this year took into account the Group's financial
performance, economic and geopolitical uncertainty including the
effects of the COVID pandemic and the war in Ukraine, the Group's
continued balance sheet strength and medium-term organic constant
currency growth.
Substantial funding capacity and liquidity
Halma's operations have continually been cash generative and the
Group has access to competitively priced committed debt finance,
providing good liquidity for the Group. Group treasury policy
remains conservative and no speculative transactions are
undertaken.
We have a strong balance sheet, solid cash generation, and
substantial available liquidity. Shortly after the year end, we
refinanced our syndicated revolving credit facility. The new
facility remains at GBP550m and matures in May 2027, and there are
two one-year extension options. In addition, we completed a new
Private Placement issuance of c.GBP330m in May 2022. The issuance
consists of Sterling, Euro, US Dollar and Swiss Franc tranches and
matures in July 2032, with an amortisation profile giving it a
seven year average life. Once the January 2023 tranche of our
existing Private Placement has matured this will give us additional
funding capacity of GBP260m.
The financial covenants on these facilities are for leverage
(net debt/ adjusted EBITDA) to not be more than three and a half
times and for adjusted interest cover to be not less than four
times. The Group continues to operate well within its banking
covenants with significant headroom under each financial ratio.
At 31 March 2022, net debt was GBP274.8m, a combination of
GBP360.1m of debt, GBP72.1m of IFRS 16 lease liabilities and
GBP157.4m of cash held around the world to finance local
operations. Net debt at 31 March 2021 was GBP256.2m.
The gearing ratio at the year-end (net debt to EBITDA) was 0.74
times (2021: 0.76 times). Net debt represented 3% (2021: 3%) of the
Group's year-end market capitalisation.
Operating cash flow summary
2022 2021
GBPm GBPm
--------------------------------------------------- ------ ------
Operating profit 278.9 240.8
--------------------------------------------------- ------ ------
Net acquisition costs and contingent consideration
fair value adjustments 3.1 5.2
--------------------------------------------------- ------ ------
Amortisation and impairment of acquisition-related
acquired intangible assets 42.7 42.3
--------------------------------------------------- ------ ------
Adjusted operating profit 324.7 288.3
--------------------------------------------------- ------ ------
Depreciation and other amortisation 49.1 50.8
--------------------------------------------------- ------ ------
Working capital movements (62.7) 2.8
--------------------------------------------------- ------ ------
Capital expenditure net of disposal proceeds (25.5) (25.9)
--------------------------------------------------- ------ ------
Additional payments to pension plans (12.2) (13.0)
--------------------------------------------------- ------ ------
Other adjustments (0.2) (2.7)
--------------------------------------------------- ------ ------
Adjusted operating cash flow 273.2 300.3
--------------------------------------------------- ------ ------
Non-operating cash flow and reconciliation to net debt
2022 2021
GBPm GBPm
------------------------------------------------------- ------- -------
Adjusted operating cash flow 273.2 300.3
------------------------------------------------------- ------- -------
Tax paid (56.0) (53.8)
------------------------------------------------------- ------- -------
Acquisition of businesses including cash/debt acquired
and fees (164.4) (48.8)
------------------------------------------------------- ------- -------
Purchase of equity investments (0.7) (3.4)
------------------------------------------------------- ------- -------
Disposal of businesses 57.5 26.1
------------------------------------------------------- ------- -------
Net finance costs and arrangement fees (excluding
lease interest) (5.7) (7.0)
------------------------------------------------------- ------- -------
Net lease liabilities additions (21.5) (23.7)
------------------------------------------------------- ------- -------
Dividends paid (68.7) (63.7)
------------------------------------------------------- ------- -------
Own shares purchased (19.3) (16.2)
------------------------------------------------------- ------- -------
Adjustment for cash outflow on share awards not
settled by own shares (7.1) (7.8)
------------------------------------------------------- ------- -------
Effects of foreign exchange (5.9) 17.1
------------------------------------------------------- ------- -------
Movement in net debt (18.6) 119.1
------------------------------------------------------- ------- -------
Opening net debt (256.2) (375.3)
------------------------------------------------------- ------- -------
Closing net debt (274.8) (256.2)
------------------------------------------------------- ------- -------
Net debt to EBITDA
2022 2021
GBPm GBPm
-------------------------------------------------- ----- -----
Adjusted operating profit 324.7 288.3
-------------------------------------------------- ----- -----
Depreciation and amortisation (excluding acquired
intangible assets) 49.1 50.8
-------------------------------------------------- ----- -----
EBITDA 373.8 339.1
-------------------------------------------------- ----- -----
Net debt to EBITDA 0.74 0.76
-------------------------------------------------- ----- -----
Average debt and interest rates
2022 2021
--------------------------------------------- ----- -----
Average gross debt (GBPm) 426.8 445.5
--------------------------------------------- ----- -----
Weighted average interest rate on gross debt 1.90% 2.32%
--------------------------------------------- ----- -----
Average cash balances (GBPm) 143.1 148.8
--------------------------------------------- ----- -----
Weighted average interest rate on cash 0.16% 0.51%
--------------------------------------------- ----- -----
Average net debt (GBPm) 283.7 296.7
--------------------------------------------- ----- -----
Weighted average interest rate on net debt 2.78% 3.22%
--------------------------------------------- ----- -----
Pensions update
The Group accounts for post-retirement benefits in accordance
with IAS 19 Employee Benefits. The Consolidated Balance Sheet
reflects the net accounting surplus on our pension plans as at 31
March 2022 based on the market value of assets at that date and the
valuation of liabilities using discount rates derived from year end
AA corporate bond yields. Lane Clark & Peacock LLP assist the
Company in setting assumptions, and valuation work is performed by
Mercer Limited.
We closed the two UK defined benefit (DB) plans to new members
in 2002. In December 2014 we ceased future accrual within these
plans with future pension benefits earned within the Group's
Defined Contribution (DC) pension arrangements. These two plans
represent over 95% of consolidated plan liabilities.
On an IAS 19 basis, before deferred taxes, the Group's DB plans
at 31 March 2022 had a surplus of GBP30.5m (2021: GBP22.5m
deficit). The value of plan assets increased to GBP347.6m (2021:
GBP333.1m). Plan liabilities decreased to GBP317.1m (2021:
GBP355.6m) due to the increase in the discount rate (1.95% to
2.80%) being greater than the increase in the long-term inflation
rate (3.2% to 3.6%). Mortality assumptions have been aligned to
updated actuarial information.
The plans' actuarial valuation reviews, rather than the
accounting basis, determine any cash deficit payments. This year
these contributions amounted to GBP11.8m, slightly lower than
expected due to a delay in agreement of the revised schedule of
contributions. Following a triennial actuarial valuation of the two
UK pension plans in this financial year, cash contributions
increasing at 7% per annum aimed at eliminating the deficit were
agreed with the trustee, and in FY23 we expect contributions to be
GBP14.6m. In the unlikely event that these payments result in a
surplus on winding up of the schemes, the Group has an
unconditional right to a refund under the plan rules.
Conclusion
We delivered a strong financial performance, despite the
challenges arising from economic and geopolitical uncertainty
including the COVID pandemic and, more recently, the conflict in
Ukraine. We delivered record revenue and profit and solid cash
flow, while substantially increasing our investment in future
growth opportunities and maintaining a strong balance sheet. My
colleagues in our finance and risk teams have helped our companies
to successfully respond to the opportunities and challenges that
have arisen in the year, through actionable insights and strong
control. I would like to thank them for their hard work and
commitment throughout the year.
Marc Ronchetti
Chief Financial Officer
Safety Sector Review
Sector overview and growth drivers
The Safety sector makes the world a safer place by protecting
people, assets and infrastructure and enabling safe movement in a
wide range of environments, including public and commercial spaces,
and industrial and logistics operations. Many of the sector's
products and services also make the world cleaner and improve
efficiency.
The long-term growth of the sector continues to be driven by
increasing safety and environmental regulation, and growing,
urbanising and ageing populations. In recent years, increasing
automation and accelerating demand for connected industrial and
infrastructure systems have further underpinned the sector's growth
prospects, as our customers have sought to benefit from the greater
efficiency and safety that can be derived from these
innovations.
The COVID pandemic and the urgent need to address the causes and
impacts of climate change have further enhanced the opportunities
available to our companies. We are already seeing effects in a
number of our businesses. For example, we are seeing increasing
demand for automated access solutions to both increase efficiency,
including by minimising heat loss in commercial and industrial
premises, and to enhance hygiene, for example through touchless
operation. We are also supporting the drive towards renewable and
cleaner energy sources, including through installing our fire
suppression technology in wind turbines, or increasing the
efficiency of industrial processes and repurposing technology
towards areas such as carbon capture and hydrogen energy sources in
our businesses which serve industrial customers.
Performance in the year
The Safety sector delivered a strong performance, benefiting
from the substantial increase in customer demand following the
easing of lockdown restrictions, and the agility of its companies
in successfully responding to new opportunities in their markets
whilst addressing supply chain and other challenges. Growth was
broadly spread across the majority of subsectors, with most
delivering double-digit revenue growth, and across all major
regions.
Revenue of GBP641.4m (2021: GBP587.0m) was 9.3% higher than in
the prior year, and up 15.9% on an organic constant currency basis.
This included a very strong performance in the first half of the
year (and particularly in the first quarter), with organic constant
currency growth of 25.3%, against a weaker comparative. The second
half of the year saw a more normal level of revenue growth, with
organic constant currency revenue increasing by 7.6%.
This strong performance was led by substantial growth in Fire
Detection, which had been most affected in the first half of last
year by lockdown restrictions and the furloughing of customer
employees, with the subsector benefiting from the easing of
lockdown restrictions and the resumption of construction
activity.
People and Vehicle Flow also grew strongly. Continued demand for
its touchless and automated entry devices, driven by changing
customer needs as a result of the pandemic, supported good growth
at BEA, and the successful execution of significant road safety
contracts drove strong growth at Navtech. Elevator Safety also grew
well, benefiting from a strong market in emergency
communication.
Growth in a number of other subsectors reflected our companies'
ability to respond rapidly to changing customer needs, for example
identifying and meeting strong demand from logistics customers for
our interlock products in Industrial Access Control, and
prioritising technologies supporting the decarbonisation of energy
sources in Pressure Management.
Across the sector, the agility of our companies also enabled
them to manage ongoing disruption in their supply chains, through a
range of initiatives including diversifying supplies, redesigning
products and selectively holding higher inventory levels to ensure
continued production.
The smaller Safe Storage and Transfer and Fire Suppression
subsectors are, respectively, seeing delays to larger
infrastructure projects, and weakness in specific markets such as
aerospace (partly offset by solid growth in other markets such as
clean energy and critical infrastructure).
The sector's revenue performance by region reflected these
themes. The UK saw the strongest revenue growth, led by Fire
Detection and People and Vehicle Flow, which included the road
safety contract mentioned above. Revenue growth in the USA was also
strong and broadly spread by sector, with the principal drivers
being Fire Detection, logistics within Industrial Access Control,
Pressure Management and emergency communication within Elevator
Safety. Asia Pacific also grew strongly, with organic constant
currency revenue growth across all subsectors, and very strong
growth in People and Vehicle Flow and in Industrial Access Control.
Overall revenue growth in Mainland Europe was good, although there
was a more mixed performance by subsector, with strong progress in
Fire Detection and Industrial Access Control, more modest gains in
some other subsectors and declines in Safe Storage and Transfer and
Fire Suppression. Other regions, accounting for around 7% of sector
revenue, saw a decline, principally reflecting delays to some
larger infrastructure projects in the Middle East, a change in
delivery location for a large customer, and the continuing impact
of the COVID pandemic in specific countries.
Profit grew by 8.1% to GBP146.2m (2021: GBP135.3m), or by 13.3%
on an organic constant currency basis. There was a modest decline
in Return on Sales to 22.8% (2021: 23.0%). This reflected increased
investment to support future growth, in research and development,
which rose to 5.6% of revenue (2021: 5.2% of revenue), and in
technology (including ongoing enterprise systems at some of the
sector's larger companies), as well as a return of discretionary
variable overhead costs. These effects were partly offset by strong
overhead control and the effect of the disposal of Texecom, which
had a lower margin, in the year. Gross margin remained broadly
unchanged compared to the prior year.
There were three acquisitions in the year for an aggregate
consideration of approximately GBP16.5m: the Ramtech group of
companies and two small bolt-on acquisitions for Fortress Safety
and Argus. In August 2021, Texecom, a UK-based provider of
electronic security systems, was sold for a total cash
consideration of GBP65m on a cash and debt-free basis. The impact
of acquisitions was a positive effect of 1.3% on revenue and 0.4%
on profit, while the disposal of Texecom had a negative effect of
5.2% on revenue and 3.3% on profit. Currency exchange movements had
a negative effect of 2.7% on revenue and 2.3% on profit.
Environmental & Analysis Sector Review
Sector overview and growth drivers
The Environmental & Analysis sector is focused on growing a
safer, cleaner and healthier future by improving the quality and
availability of life-critical natural resources such as air, water
and food and by delivering high-technology solutions in a wide
variety of end markets based on our digital, optical and
optoelectronic expertise. The sector's valuable solutions are
technically differentiated through strong application knowledge,
supported by high levels of customer responsiveness.
The sector's long-term growth is sustained by rising demand for
life-critical resources, the impact of climate change, increasing
environmental regulations and worldwide population growth with
rising standards of living. It is underpinned by our ability to
design, develop and manufacture innovative, high-technology
detection and analysis solutions with applications in a wide range
of sectors. These include water and waste water management and
treatment (including water utilities); gas analysis and detection;
food, beverage, medical and bio-medical; communications; research
and science; and a variety of industrial markets.
The increasingly urgent need to address climate change is
creating new opportunities in many of the sector's markets. It is
driving new policies globally, including national, state and city
initiatives to meet Net Zero commitments through energy transition
and sectoral decarbonisation plans, as well as plans to increase
adaptation and resilience. Combined with the biodiversity crisis
and an increasing focus on plastics and waste, it is also driving
new regulatory initiatives to preserve life-critical resources.
These include initiatives such as, in the UK, Ofwat's
investigations into wastewater treatment and internal sewer
flooding to prevent environmental degradation. These and similar
initiatives are creating growing long-term opportunities for our
companies to help their customers, for example, to prevent
emissions, detect leaks and analyse air and water quality, and to
support new technologies to address these issues, such as renewable
energy and storage, sustainable food systems and mobility in
cities.
Performance in the year
The Environmental & Analysis sector delivered a very strong
performance, driven by a recovery in customer orders as the effects
of the COVID pandemic eased, and benefiting from its agility in
executing these orders in spite of supply chain disruptions. Growth
was broadly spread, with all subsectors and all regions delivering
double digit revenue growth.
Revenue of GBP442.9m (2021: GBP361.1m) was 22.6% higher, and up
24.5% on an organic constant currency basis. Acquisitions (net of
disposals) contributed 1.6% to revenue growth. The sector's growth
was led by a strong recovery in gas detection within Environmental
Monitoring, reflecting higher activity (including some larger
contracts) as the effects of the pandemic abated, and an increasing
customer focus on protecting the environment and scarce natural
resources. This also supported greater demand within Water Analysis
& Treatment, although revenue in clean water leak detection was
lower, given an absence of large project tenders from UK
utilities.
Within Optical Analysis, photonics also performed strongly, as
it continued to benefit from increasing demand for technologies
that support the building of digital and data capabilities.
By region, the USA accounts for nearly half of the sector's
revenue, and reported the strongest organic constant currency
growth, driven by further growth in photonics within Optical
Analysis, and in gas detection, which benefited from post-pandemic
recovery and large new customer orders in the second half of the
year. Asia Pacific also grew strongly, benefiting from customer
demand for products supporting new fuel cell technology, from
investment in talent to support the development of gas detection
businesses, and from recovery in the pharmaceutical and beverage
markets. Mainland Europe reported strong growth on an organic
constant currency basis, driven by good performances in Water
Analysis and Treatment, and also benefited from acquisitions,
notably those of Sensitron, Orca and Dancutter. Strong growth in
Africa, Near and Middle East was mainly attributable to a post
COVID recovery in the oil and gas sector, which benefited our gas
detection companies. The UK reported the slowest growth given lower
order intake in clean water technologies from UK utilities,
although this was partly offset by a larger contract win in waste
water infrastructure and the acquisition of Anton Industrial
Services within gas detection.
Profit grew by 23.0% to GBP109.8m (2021: GBP89.3m), or by 23.3%
on an organic constant currency basis, and Return on Sales was
marginally higher at 24.8% (2021: 24.7%). This reflected a
reduction in gross margin as a result of product mix offset by
continued strong overhead control. While there was a reduction in
R&D expenditure as a percentage of sales from 5.7% to 5.1%,
this was in part driven by product mix, and absolute expenditure on
R&D increased to GBP22.8m (2021: GBP20.6m).
There were five acquisitions in the sector during the year, and
a further acquisition, of Deep Trekker, was made shortly after the
year end. This good momentum reflected the investment made in a
dedicated M&A team, as part of the new Environmental &
Analysis sector team, and the increasing ability of our individual
companies to make bolt-on acquisitions to enhance their
technological capabilities and market reach. The acquisitions made
in the year were (all considerations were in cash and are given on
a cash and debt-free basis):
- Anton Industrial Services, Crowcon's UK flue gas analyser
distribution partner, for GBP1.9m;
- Sensitron S.R.L., an Italian gas detection company, for
EUR20.1m (approximately GBP17.1m), as a standalone company in the
sector;
- Dancutter A/S, a Danis0h designer and manufacturer of
trenchless pipeline rehabilitation equipment, for EUR17.6m
(approximately GBP15.0m), for Minicam;
- Orca GmbH, a German manufacturer of ultraviolet disinfection
systems, for EUR8.1m (approximately GBP7.0m), for the UV Group of
companies; and
- International Light Technologies, a leading developer of
technical lighting sources and light measurement systems, for
US$26.3m (approximately GBP19.4m), for Ocean Insight.
Since the year end, there has been one further acquisition in
the sector, Deep Trekker, of C$60.0m (approximately GBP36.6m),
which will be a stand-alone company. Deep Trekker is a
market-leading manufacturer of remotely operated underwater robots
used for inspection, surveying, analysis and maintenance.
Acquisitions (net of disposals) had a positive effect of 1.6% on
revenue and 3.5% on profit. Currency exchange movements had a
negative effect of 3.5% on revenue and 3.8% on profit.
Medical Sector Review
Sector overview and growth drivers
The Medical sector is focused on growing a healthier future by
enhancing the quality of life for patients and improving the
quality of care delivered by healthcare providers. We serve niche
applications in global markets providing critical components,
devices, systems and therapies which are embedded in the standard
of care. We look for markets where our products and technologies
are critical to the function or management of care, for example
cataract surgery or cardiac monitoring. We also often participate
in niches where there is a connection between medical conditions
and chronic illnesses, thereby driving potentially higher rates of
demand on a sustained basis.
The sector's long-term growth is supported by demographic
trends, technological innovation, and aspirations to improve the
standard of care and increase efficiency.
The global population is expected to reach nearly 10 billion by
2050, an increase of around 2 billion from current levels, and the
proportion of the world's population aged over 60 is forecast to
increase from 12% to 22%. This is expected to lead to an increased
prevalence of chronic conditions, driving demand for diagnosis and
treatment of a wide variety of long-term illnesses. These factors
are key growth drivers for our Therapeutic Solutions businesses,
given their presence in the ophthalmic surgery device, respiratory
therapy and bone replacement markets.
Technological innovations are also driving growth. They are
increasing the capabilities of healthcare professionals to prevent,
diagnose and treat conditions. They are also helping healthcare
providers to improve the standards of care and increase efficiency,
including by treating more people remotely through telemedicine.
These innovations are enabling better, earlier and faster diagnosis
and treatment of patients, providing healthcare providers with new
tools to tackle the backlog of conditions caused by the COVID
pandemic. At the same time, new products and services are enabling
them to provide more healthcare for less, and improving hygiene
compliance. These factors are strong growth drivers for our
diagnostics businesses, and also for businesses such as PeriGen, in
helping to prevent complications during childbirth, and CenTrak,
with its real-time location services which improve safety and
efficiency in healthcare facilities.
Globally, we also see rising demand, from both patients and
healthcare providers, for improvements to the quality and
responsiveness of healthcare services. The COVID pandemic has shown
the importance of robust healthcare systems and the long-term
benefits of investing in the health of populations. It is still too
early to predict the eventual outcomes of the pandemic on
healthcare spending, but increased utilisation of assets and rising
demand seem likely to support increases in the future.
From 16 June 2022, the sector has been renamed Healthcare, to
reflect the breadth of these growth drivers, and our wider
aspiration to support patient diagnosis and treatment, as well as
healthcare providers in improving the delivery of patient-centred
care.
Performance in the year
The sector delivered a strong performance. Revenue of GBP442.3m
(2021: GBP371.3m) was 19.1% higher, and up 13.0% on an organic
constant currency basis. Acquisitions contributed 10.1% to revenue
growth. Overall, sector companies successfully responded to
variations in customer demand and to continuing operational
challenges in their supply chains, in labour markets, and in their
ability to access customer premises. All but three sector companies
delivered double digit growth as a result of strong increases in
customer demand as the effects of the COVID pandemic abated and
medical systems began to normalise.
There was double digit revenue growth across all major regions.
The USA accounts for half of the sector's revenue. There was good
growth in the region on an organic constant currency basis,
reflecting increased customer demand and a strong order book. On a
reported basis, there was also a benefit from recent acquisitions,
including PeriGen. A small number of companies which had seen very
strong demand through the COVID pandemic saw reduced customer
demand, and there was also some impact from continued delays to
elective surgeries.
Mainland Europe and Asia Pacific grew strongly, principally
reflecting recovery from the effects of the pandemic. The UK saw
very strong growth, particularly in ophthalmology, and also
benefited from the acquisition of Static Systems in the prior year,
to reach just under 10% of sector revenue. Other regions, which
represent a small percentage of sector revenue, grew more
modestly.
Profit grew by 15.0% to GBP99.5m (2021: GBP86.6m), or by 10.5%
on an organic constant currency basis, and Return on Sales was
22.5% (2021: 23.3%). This included a substantial increase in
R&D expenditure to GBP26.9m, representing 6.1% of revenue
(2021: GBP18.8m; 5.1% of revenue), given an intensification of new
product development and new product launches in the year. It also
reflected the allocation of the full cost of a sector team
following the creation of a separate team for the Environmental
& Analysis sector. These effects were partly offset by an
increase in gross margin as most sector companies successfully
managed pressures resulting from supply chain disruptions, and by
ongoing strong overhead control.
There were five acquisitions in the sector during the year.
These comprised PeriGen, which will be a new standalone company in
the sector, and four bolt-on acquisitions to enhance the
capabilities of existing sector companies. The acquisitions
were:
- PeriGen, whose advanced technology protects mothers and their
unborn babies during childbirth, was acquired for a cash
consideration of US$57.3m (approximately GBP40.1m) on a cash and
debt-free basis;
- Assets and intellectual property associated with RNK's digital
stethoscope, for Riester, for a consideration of US$3.0m
(approximately GBP2.1m);
- Meditech Kft, a Hungarian manufacturer of ambulatory blood
pressure monitors and ECG Holter devices, for a maximum total
consideration of EUR5.7m (approximately GBP5.0m), which will be
integrated with our SunTech business;
- Infinite Leap, a healthcare consulting and services provider
for real-time location technologies, which will enhance CenTrak's
capabilities. The cash consideration was US$30.8m (approximately
GBP22.9m). There are additional contingent earn-out considerations
of up to an aggregate maximum of US$17m (approximately GBP12.9m);
and
- Clayborn Lab, a provider of custom heat tape solutions, for an
initial cash consideration of US$4.5m (approximately GBP3.3m) with
an additional earn-out consideration of US$1.5m (approximately
GBP1.1m).
Acquisitions had a positive effect of 10.1% on revenue and 8.9%
on profit. Currency exchange movements had a negative effect of
4.0% on revenue and 4.4% on profit.
Principal Risks and Uncertainties
1. Innovation & Digital
Risk Owner: Inken Braunschmidt
Gross risk level: High
Change: No Change
Risk appetite: Seeking
Growth enablers
-- Digital Growth Engines
-- Innovation Network
-- M&A
-- Strategic Communications and Brand
Risk and impact
-- Failing to innovate to create new high-quality products to
meet customer needs, or failure to adequately protect intellectual
property, resulting in a loss of market share and poor financial
performance.
How do we manage the risk?
-- Product development is devolved to our companies who are closest to the customer.
-- Chief Innovation and Digital Officer supports sectors to
promote and accelerate innovation by our companies.
-- Digital innovation strategy focuses on incubation and
acceleration of innovation. Supported by a champions network and
partnerships.
-- Education of our companies around customer centricity and
voice of the customer to feed our innovation and ideation.
-- Promotion of active collaboration of ideas and best practices between companies.
-- Focus on talent and retention to ensure there is sufficient expertise within the business.
-- Review of R&D budgets and projects by sectors to ensure
they are being spent most effectively in the markets where we want
to participate.
-- Halma senior management approval of all large R&D projects to ensure alignment with strategy.
-- Companies are encouraged to develop and protect intellectual property.
-- Conferences and development programmes help spread ideas and
best practice across the Group. Innovation awards reward and
encourage innovation.
-- M&A activity is targeted to help address innovation and
R&D gaps, in line with sector specific initiatives.
-- Monitoring of key R&D and innovation metrics to measure positive impact.
-- Regular promotion, training and monitoring of agile or lean
start-up ways of working in companies.
2. Talent and Diversity
Risk Owner: Jennifer Ward
Gross risk level: High
Change: Increased
Risk appetite: Open
Growth enablers
-- Digital Growth Engines
-- Innovation Network
-- International Expansion
-- Strategic Communications and Brand
-- Talent & Culture
Risk and impact
-- Not having the right talent and diversity at all levels of
the organisation to deliver our strategy, resulting in reduced
financial performance. The increased risk reflects retention risks
emerging due to our rapid escalation through the FTSE 100,
increased profile and track record of success. This risk includes
the talent needed to effectively manage a low-carbon
transition.
How do we manage the risk?
-- Annual Performance and Development Review process for Sector
and Executive Board members. Nomination Committee annual review of
succession and development plans.
-- DE&I strategy in place and targets for Executive Board.
Quarterly review of diversity metrics (gender, ethnicity and
nationality), used to drive action plans at each level.
-- Annual employee engagement survey to provide insight into
employee sentiment including alignment between strategy and
objectives and clarity to employees about their contribution
towards achieving objectives.
-- Comprehensive recruitment processes to recruit the best and brightest talent.
-- Ongoing climate related talent identification and upskilling.
-- Development of talent and diversity across our companies,
including development programmes, to give us competitive advantage
and ensure we have motivated leaders to deliver our strategy.
-- Annual strategic review of sector board and company
leadership talent to identify and develop future leaders. Defined
competency and potential model used.
-- Future Leaders programme to develop graduates.
-- Senior Management reward structure aligned with strategic
priorities of companies, sectors and Group. Work is continuing in
this area to ensure that our reward packages are competitive,
reflect our high long-term growth and are benchmarked to
market.
3. Acquisitions and Investments
Risk Owner: Andrew Williams
Gross risk level: High
Change: No Change
Risk appetite: Open
Growth enablers
-- Finance, Legal & Risk
-- International Expansion
-- M&A
-- Strategic Communications and Brand
-- Talent & Culture
Risk and impact
-- Failing to achieve our strategic growth target for
acquisitions and investments due to insufficient opportunities
being identified, poor due diligence or poor integration, resulting
in erosion of shareholder value. Our three sectors are now aligned
according to our purpose and reorganising the sectors enabled us to
increase our M&A team by 50%.
How do we manage the risk?
-- Clear strategy and agile business model that allows us to
take advantage of new growth opportunities as they arise.
-- Acquisition of companies in our existing or adjacent markets.
-- Dedicated M&A Directors with Group Chief Executive, Chief
Financial Officer and plc Board oversight, scrutiny and approval of
all acquisitions.
-- As our companies scale, they are now more able to take on
bolt-on acquisitions to accelerate their growth.
-- Regular reporting of the acquisition pipeline to the Executive and plc Boards.
-- Careful due diligence by experienced staff who bring in specialist expertise as required.
-- Strategic transformation plans in place for new acquisitions
to seek to ensure they achieve their growth potential.
-- Clear process in place to ensure successful integration from
a control and compliance perspective.
-- Internal Audit review within 12 months of acquisition to review minimum expected controls.
-- Post-acquisition reviews are performed for all acquisitions
after 12 months to ensure strategic objectives are being met and to
identify learnings for future acquisitions.
-- Investment framework and model in place to capture process,
approvals and oversight for minority equity investments. Lessons
learnt review following each investment to improve future
processes. Regular review by the Investment Committee.
-- A climate related low-carbon transition risk and opportunity
review has been built into our standalone M&A process.
4. Cyber
Risk Owner: Catherine Michel
Gross risk level: High
Change: Increased
Risk appetite: Averse
Growth enablers
-- Digital Growth Engines
-- Finance, Legal & Risk
-- International Expansion
-- Talent & Culture
Risk and impact
-- Loss of digital intellectual property/data or ability to
operate systems or connected devices due to internal failure or
external attack. There is resulting loss of information or ability
to continue operations, and therefore financial and reputational
damage. The continued increase in this risk reflects the growing
threat generally from cyber-crime around the world.
How do we manage the risk?
-- Clear ownership of cyber risk, with Board level expertise.
-- Cyber risk policies and procedures in place.
-- Halma approved services available to all companies to help them manage their cyber risks.
-- Cyber threat reporting every two months for all parts of the Group.
-- IT disaster recovery and back-up plans in place, required to be tested regularly.
-- Regular online IT awareness training provided for all
employees who use computers. Central and local IT expertise.
-- Six monthly Internal Control Certifications submitted by
companies include the most critical IT controls.
-- All employees are required to read and sign up to the IT Acceptable Use policy.
-- Periodic assurance reviews by Internal Audit.
-- Crisis communications plan and access to cyber expertise should a cyberattack occur.
5. Organic Growth
Risk Owner: Andrew Williams
Gross risk level: High
Change: No change
Risk appetite: Open
Growth enablers
-- Digital Growth Engines
-- Finance, Legal & Risk
-- Innovation Network
-- International Expansion
-- Strategic Communications and Brand
-- Talent & Culture
Risk and impact
-- Failing to deliver desired organic growth, resulting in
missed expected strategic growth targets and erosion of shareholder
value. Whilst the overall gross risk level is unchanged, our
companies have been managing supply chain and labour shortage risks
and well as inflationary pressures. The risk includes potential
impacts from the net zero transition on our supply chain and
operations.
How do we manage the risk?
-- Clear Group strategy to achieve organic growth targets,
supported by detailed company strategies and seven Halma Growth
Enablers with Executive Board owners. Clear Halma DNA.
-- Sector management ensure that the Group strategy is fulfilled
through ongoing review and chairing of companies.
-- Regional hubs, for example in China and India, support local
strategic growth initiatives for all companies.
-- Annual strategic planning and budgeting process with rolling
12 month forecasting and a focus on good P&L and balance sheet
control.
-- Remuneration of company executives and above is based on profit growth.
-- Continued investment in R&D to drive innovation and
growth with KPIs monitored at Board level.
-- Innovation rewarded through Innovation Awards at leadership conferences.
-- Agile business model and culture of innovation to take
advantage of new growth opportunities as they arise.
-- Potential new acquisitions, partnerships and investments
assessed for future organic growth prospects to align to
strategy.
-- Focus on having the best talent on board to deliver strategy and therefore organic growth.
-- Climate-risk and opportunity review processes and governance are in place.
-- Ongoing climate related upskilling of company and sector
boards to help us manage the low-carbon transition.
6. Business Model and its Communication
Risk Owner: Andrew Williams
Gross risk level: High
Change: No Change
Risk appetite: Open
Growth enablers
-- Digital Growth Engines
-- Finance, Legal & Risk
-- International Expansion
-- M&A
-- Strategic Communications and Brand
Risk and impact
-- Failing to clearly articulate or adapt our business model as
Halma grows through exploring and implementing additional or new
business models, resulting in missed growth opportunities and
erosion of shareholder value. This risk includes meeting increasing
or shifting stakeholder expectations around climate change.
How do we manage the risk?
-- Clear communication of Halma's business model and any new
developments disclosed in the Annual Report and Accounts and at
investor events. Regular external and internal communications to
reinforce business model understanding.
-- Comprehensive expert reviews of existing and potential new
markets to identify strategies with significant growth
potential.
-- Identification of companies with products or markets that
would have a good strategic fit for Halma. This includes start-ups,
service and software companies that could help accelerate the
growth of existing companies.
-- Monitoring of market trends, including customer preferences,
emerging technologies and competitors.
-- Developing collaboration capabilities of every company to
take advantage of identified opportunities.
-- Post-acquisition monitoring to ensure that the objective for
acquiring each business has been achieved and learning
opportunities identified.
-- Strategic reviews of business model at Board level to
consider the strengths and weakness of the existing business model
and alternative business models.
-- Sector and Executive Boards perform reviews to identify opportunities which may require a new organisational approach.
-- Sustainability governance and structure to accelerate action in place.
-- Continued development of climate and sustainability-related
information available to investors and stakeholders, including TCFD
disclosures.
7. Economic and Geopolitical Uncertainty
Risk Owner: Andrew Williams
Gross risk level: High
Change: Increased
Risk appetite: Cautious
Growth enablers
-- Finance, Legal & Risk
-- International Expansion
-- Talent & Culture
Risk and impact
-- Failure to anticipate or adapt to geopolitical changes or a
recession, resulting in a decline in financial performance and an
impact on the carrying value of goodwill and other assets. This
risk remains elevated in certain geographies due to the COVID
pandemic and also other geopolitical events such as the conflict in
Ukraine and USA/ China trade relations.
How do we manage the risk?
-- Diverse portfolio of companies across the sectors, in
multiple countries and in relatively non-cyclical global niche
markets help to minimise the impact of any single event operating
in one market.
-- Regular monitoring and assessment of potential risks and
opportunities relating to economic or geopolitical
uncertainties.
-- Identification of any wider trends by the Halma Executive Board that require action.
-- Risk managed at local company level and they have the autonomy to rapidly adjust to changing circumstances.
-- Financial strength and availability of pooled resources in
Group as well as robust credit management processes in place across
the Group.
-- Operations, cash deposits and sources of funding in uncertain regions are kept to a minimum.
-- Knowledge and monitoring of global regulatory requirements.
-- Financial warning signs KPIs give earlier indications of potential problems.
-- Active reduction of key customer or market concentration
through new product and market diversification for both core and
acquired businesses.
-- Monitoring of any changes in corporate and government
investment due to macroeconomic factors.
-- Periodic assessment of the carrying value of goodwill and other assets.
8. Natural Hazards, including Climate Change
Risk Owner: Funmi Adegoke
Gross risk level: Medium
Change: No change
Risk appetite: Averse
Growth enablers
-- Finance, Legal & Risk
-- M&A
-- International Expansion
-- Strategic Communications and Brand
-- Talent & Culture
Risk and impact
-- There is a risk we are unable to respond to large scale
disasters or natural catastrophes such as hurricanes, floods, fires
or pandemics, as well as longer term changes to the climate such as
increasing water scarcity and temperatures, resulting in the
inability of one or more of our businesses to operate, causing
financial loss and reputational damage. The impact of physical
climate change is likely to increase the risks to our operations
and supply chain due to increasingly severe and/or frequent weather
events.
How do we manage the risk?
-- Halma operates in end markets with strong long-term growth
drivers and lower risks of shocks due to natural hazards.
-- Sustainability is a regular agenda item for the Executive and plc Boards.
-- A Sustainability Network is in place which raises the
awareness of sustainability issues, including climate change, in
our companies.
-- TCFD compliance work is helping to evaluate the potential
impacts of climate-related risks and opportunities and determine
the appropriate strategic actions.
-- All parts of the Group are required to have business
continuity plans in place which are tailored to manage the specific
risks they are most likely to face and these are required to be
tested periodically.
-- The geographical diversity of Halma's companies reduces the
impact of any single event and Halma has manufacturing capability
in multiple locations which provides flexibility.
-- There is a culture of support to affected businesses from
other Halma companies if the need arises.
-- Group level oversight of IT communications infrastructure.
-- A crisis management plan exists to manage communications and
the reputational risk for Halma and/or its companies.
-- Business interruption insurance is in place where possible
and appropriate to limit any financial loss that may occur.
-- Climate-risk and opportunity review processes and governance are in place.
-- Ongoing climate related upskilling of company and sector boards.
9. Product Failure or Non-compliance
Risk Owner: Andrew Williams
Gross risk level: Medium
Change: Increased
Risk appetite: Averse
Growth enablers
-- Innovation Network
-- Strategic Communications and Brand
-- Talent & Culture
Risk and impact
-- A failure of one of our products results in serious injury,
death or damage to property, including due to non-compliance with
product regulations, resulting in financial loss and reputational
damage. The risk is increasing due to a trend of increasing
regulation and also the current pressures in the supply chain
around the world, leading to a greater number of alternative
sourcing solutions being required.
How do we manage the risk?
-- The board of each company is accountable for complying with product regulatory requirements.
-- Analysis of market requirements, including safety, are made
during a product design phase to ensure compliance with all
regulatory requirements and customer needs.
-- Companies have strict product development and testing
procedures in place to ensure product quality and regulatory
compliance.
-- Rigorous testing of products during development and also during the manufacturing process.
-- Clear requirements for suppliers, including those providing
alternative sourcing in the current climate, to ensure safety and
quality.
-- Checks are performed on product received from suppliers.
-- Monitoring of defects and warranty returns to identify any
potential safety defect which can then be rectified.
-- Traceability of product so that batches can be identified where appropriate.
-- Product compliance with regulations is checked as part of due diligence for any acquisition.
-- Terms and conditions of sale limit liability as much as
practically possible and liability insurance is in place.
-- A crisis management plan exists to manage communications and
the reputational risk for Halma and/or its companies.
10. Non-compliance with Laws and Regulations
Risk Owner: Funmi Adegoke
Gross risk level: High
Change: No Change
Risk appetite: Averse
Growth enablers
-- Finance, Legal & Risk
-- International Expansion
-- Strategic Communications and Brand
-- Talent & Culture
Risk and impact
-- We are not fully compliant with relevant laws and
regulations, resulting in fines, reputational damage and possible
criminal liability for Halma senior management.
How do we manage the risk?
-- The board of each company is accountable for identifying and
monitoring what laws are relevant to their business, including any
emerging or changing legislation, and for ensuring commercial legal
risks are appropriately managed.
-- Group Legal advises on legislative and regulatory changes
relevant to the Group as a listed company and that could have a
material impact.
-- An approved list of legal suppliers exists to ensure our
companies can access high quality legal advice directly.
-- Group policies, procedures and guidance are in place, setting
out the Group's requirements from a compliance and regulatory
perspective, and context for the Group's risk appetite.
-- All employees are required to sign to confirm that they have
read and understood the Halma Code of Conduct.
-- Ongoing training and advisory programme for Group and companies.
-- Appropriate levels of Group insurance cover are maintained.
-- A third party whistleblowing hotline is in place and
available for use by all employees and third parties to raise any
issues of concern or non-compliance.
-- Six monthly Internal Control Certifications submitted by
companies include the most critical legal and regulatory compliance
controls.
-- Deputy General Counsel sit on the sector boards and help
facilitate both formal and informal reviews of sector legal and
regulatory compliance.
-- Thorough legal due diligence and acquisition support process in place.
-- Claims and litigation risks are reported by all companies
every six months. Material legal issues and risks are reported to
and discussed by the plc board every quarter.
-- A crisis management plan exists to manage communications and
the reputational risk for Halma and/or its companies.
-- Periodic assurance reviews by Internal Audit.
11. Financial Controls
Risk Owner: Marc Ronchetti
Gross risk level: Medium
Change: No Change
Risk appetite: Averse
Growth enablers
-- Finance, Legal & Risk
-- International Expansion
-- Talent & Culture
Risk and impact
-- Failure in financial controls either on its own or via a
fraud which takes advantage of a weakness, resulting in financial
loss and/or misstated reported financial results.
How do we manage the risk?
-- Local directors have legal, as well as operational,
responsibility as they are statutory directors of their companies.
This fits with Halma's decentralised model to ensure an effective
financial control environment is in place.
-- Group policies, procedures and guidance are in place for expected financial controls.
-- Onboarding of new finance teams and members, together with
ongoing training of Halma's financial control framework and its
implementation.
-- Six monthly Internal Control Certifications submitted by
companies include the most critical financial compliance controls.
These include segregation of duties, delegation of authorities and
financial accounts preparation checks.
-- Sector and Group Finance teams perform regular reviews of financial reporting and indicators.
-- Six monthly peer reviews of reported results for each company
are performed to provide independent challenge.
-- Periodic assurance reviews by Internal Audit.
-- A third party whistleblowing hotline is in place and
available for use by all employees and third parties to raise any
issues of concern or non-compliance.
12. Liquidity
Risk Owner: Marc Ronchetti
Gross risk level: Medium
Change: No change
Risk appetite: Averse
Growth enablers
-- Finance, Legal & Risk
-- International Expansion
Risk and impact
-- There is a risk that the Group's cash/funding resources are
inadequate to support its activities or there is a breach of
funding terms. There continues to be some risk due to the impact of
the COVID pandemic but this is being managed effectively at Group
and company level.
How do we manage the risk?
-- A clear financial model and conservative balance sheet strategy exists.
-- The strong cash flow generated by the Group provides
financial flexibility, together with a revolving credit
facility.
-- Cash needs are monitored regularly through review of the
Group cash position and a 12 month rolling forecast.
-- Liquidity forecasts are prepared covering the next three
years and are updated and reviewed at least every six months.
-- Treasury policy and procedures provide comprehensive guidance
to companies on banking and transactions.
-- Monthly monitoring of current and forecast covenant compliance.
-- All drawdowns and all new or renewed sources of funding are
subject to approval by the Chief Financial Officer and Head of
Group Treasury.
-- The currency mix of debt is reviewed annually, and on acquiring or disposing of a business.
Going concern statement
The Group's business activities, together with the main trends
and factors likely to affect its future development, performance
and position, and the financial position of the Group as at 31
March 2022, its cash flows, liquidity position and borrowing
facilities are set out in the Strategic Report. In addition, the
Annual Report and Accounts 2022 contains further information
concerning the security, currency, interest rates and maturity of
the Group's borrowings.
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis the Directors have
considered all of the above factors, including potential scenarios
and its principal risks set out above. Under the potential
scenarios considered, which includes a severe but plausible
downside scenario, the Group remains within its debt facilities and
the attached financial covenants for the foreseeable future and the
Directors therefore believe, at the time of approving the financial
statements, that the Company is well placed to manage its business
risks successfully and remains a going concern. The key facts and
assumptions in reaching this determination are summarised
below.
Our financial position remains robust with committed facilities
at the balance sheet date totalling approximately GBP670m which
includes a GBP550m Revolving Credit Facility (RCF). In May 2022 the
RCF was refinanced and now matures in May 2027 with two one-year
extension options. During May 2022, the Group also entered into a
Note Purchase Agreement which provides access to loan notes
totalling GBP330m, to be drawn in various currencies in July 2022
subject to certain conditions. The Group is confident that these
conditions will be satisfied and thus the GBP330m loan notes form
part of the available facilities in the Group's Going Concern and
Viability assessments. The financial covenants across the
facilities are for leverage (net debt/adjusted EBITDA) of not more
than three and a half times and for adjusted interest cover of not
less than four times.
Our base case scenario has been prepared using forecasts from
each of our Operating Companies as well as cash outflows on
acquisitions in line with pre COVID-19 levels. In addition, a
severe but plausible downside scenario has been modelled showing a
decline in trading for the year ending 31 March 2023 to below
levels seen for the year ended 31 March 2022. This reduction in
trading could be caused by further significant, unexpected COVID-19
impacts or another significant downside event. In mitigating the
impacts of the downside scenario there are actions that can be
taken which are entirely discretionary to the business such as
acquisitions spend and dividend growth rates. In addition, the
Group has demonstrated strong resilience and flexibility during the
COVID pandemic in managing overheads which could be used to further
mitigate the impacts of the downside scenario. The scenarios
modelled cover a period of greater than 12 months from the date of
the financial statements.
Neither the base case nor severe but plausible downside
scenarios result in a breach of the Group's available debt
facilities or the attached covenants and, accordingly, the
Directors believe there is no material uncertainty in the use of
the going concern assumption and, therefore, deem it appropriate to
continue to adopt the going concern basis of accounting for at
least the next 12-month period.
Viability Statement
During the year, the Board carried out a robust assessment of
the principal risks affecting the Group, including those that would
threaten its business model (as set out earlier in the Strategic
Report), future performance, solvency or liquidity. The principal
risks and uncertainties, including an analysis of the potential
impact and mitigating actions are set out above.
The Board has assessed the viability of the Group over a
three-year period, taking into account the Group's current position
and the potential impact of the principal risks and uncertainties.
While the Board has no reason to believe that the Group will not be
viable over a longer period, it has determined that three years is
an appropriate period. In drawing its conclusion, the Board has
aligned the period of viability assessment with the Group's
strategic planning process (a three-year period). The Board
believes that this approach provides greater certainty over
forecasting and, therefore, increases reliability in the modelling
and stress testing of the Company's viability. In addition, a
three-year horizon is typically the period over which we review our
external bank facilities and is also the performance-based period
over which awards granted under Halma's share-based incentive plan
are measured.
In reviewing the Company's viability, the Board has identified
the following factors which they believe support their
assessment:
1. The Group operates in diverse and relatively non-cyclical
markets.
2. There is considerable financial capacity under current
facilities and the ability to raise further funds if required.
3. The decentralised nature of our Group ensures that risk is
spread across our businesses and sectors, with limited exposure to
any particular industry, market, geography, customer or
supplier.
4. There is a strong culture of local responsibility and
accountability within a robust governance and control
framework.
5. An ethical approach to business is set from the top and flows
throughout our business.
In making their assessment, the Board carried out a
comprehensive exercise of financial modelling and stress-tested the
model with a downside scenario based on the principal risks
identified in the Group's annual risk assessment process. The
scenarios modelled used the same assumptions as for the going
concern review, as set out above. The base case reflects the latest
forecasts and strategic plans of the business. The downside
scenario included a reduction in trading for the year ending 31
March 2023 to below levels seen for the year ended 31 March 2022,
and also included a significant downside event arising from the
impacts of the Group's other principal risks such as litigation or
product failure. For the years ending 31 March 2024 and 31 March
2025 the downside scenario reflects expected base case revenue
growth more than halving with the growth rate applied to the 2023
downside scenario revenue. In both scenarios, the effect on the
Group's KPls and borrowing covenants was considered, and
significant headroom remained. Based on this assessment, the Board
confirms that they have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as
they fall due over the three-year period to 31 March 2025.
Responsibility Statement of the Directors on the Annual Report
and Accounts
The responsibility statement below has been prepared in
connection with the Company's full Annual Report and Accounts for
the year to 31 March 2022. Certain parts thereof are not included
within these Results.
Each of the Directors, whose names and functions are listed in
the Annual Report and Accounts 2022, confirm that, to the best of
their knowledge:
-- the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group;
-- the company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS
101, give a true and fair view of the assets, liabilities and
financial position of the company; and
-- the Strategic Report and the Directors' Report includes a
fair review of the development and performance of the business and
the position of the Group and company, together with a description
of the principal risks and uncertainties that it faces.
This responsibility statement was approved by the Board of
Directors on 16 June 2022.
Andrew Williams Marc Ronchetti
Group Chief Executive Chief Financial Officer
Results for the year to 31 March 2022
Consolidated Income Statement
Year ended 31 March Year ended 31 March
2022 2021
------------------------------------ ------------------------------------
Adjustments* Adjustments*
Before (note Before (note
adjustments* 1) Total adjustments* 1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----- ------------- ------------ ------- ------------- ------------ -------
Continuing operations
Revenue 1 1,525.3 - 1,525.3 1,318.2 - 1,318.2
--------------------------- ----- ------------- ------------ ------- ------------- ------------ -------
Operating profit 324.7 (45.8) 278.9 288.3 (47.5) 240.8
Share of loss of associate (0.1) - (0.1) - - -
Profit on disposal
of operations 9 - 34.0 34.0 - 22.1 22.1
Finance income 4 0.6 - 0.6 1.0 - 1.0
Finance expense 5 (9.0) - (9.0) (11.0) - (11.0)
--------------------------- ----- ------------- ------------ ------- ------------- ------------ -------
Profit before taxation 316.2 (11.8) 304.4 278.3 (25.4) 252.9
Taxation 6 (68.3) 8.1 (60.2) (55.8) 6.2 (49.6)
--------------------------- ----- ------------- ------------ ------- ------------- ------------ -------
Profit for the year 1 247.9 (3.7) 244.2 222.5 (19.2) 203.3
--------------------------- ----- ------------- ------------ ------- ------------- ------------ -------
Attributable to:
Owners of the parent 244.4 203.4
Non-controlling interests (0.2) (0.1)
--------------------------- ----- ------------- ------------ ------- ------------- ------------ -------
Earnings per share 2
From continuing operations
Basic 65.48p 64.54p 58.67p 53.61p
Diluted 64.42p 53.50p
Dividends in respect
of the year 7
Paid and proposed (GBPm) 71.5 66.8
Paid and proposed per
share 18.88p 17.65p
--------------------------- ----- ------------- ------------ ------- ------------- ------------ -------
* Adjustments include the amortisation of acquired intangible
assets; acquisition items; significant restructuring costs, and
profit or loss on disposal of operations; and the associated
taxation thereon. Note 3 provides more information on alternative
performance measures.
Consolidated Statement of Comprehensive Income and
Expenditure
Year ended Year ended
31 March 31 March
2022 2021
Notes GBPm GBPm
------------------------------------------------------ ----- ---------- ----------
Profit for the year 244.2 203.3
Items that will not be reclassified subsequently
to the Consolidated Income Statement:
Actuarial gains/(losses) on defined benefit pension
plans 41.6 (30.6)
Tax relating to components of other comprehensive
income that will not be reclassified 6 (9.6) 5.9
Changes in the fair value of equity investments
at fair value through other comprehensive income (1.7) -
Items that may be reclassified subsequently to
the Consolidated Income Statement:
Effective portion of changes in fair value of
cash flow hedges (1.5) 1.0
Deferred tax in respect of cash flow hedges accounted
for in the hedging reserve 6 0.4 (0.2)
Exchange gains/(losses) on translation of foreign
operations and net investment hedge 43.9 (72.7)
Exchange gains on translation of foreign operations
recycled to the income statement on disposal - (2.8)
Other comprehensive income/(expense) for the year 73.1 (99.4)
------------------------------------------------------ ----- ---------- ----------
Total comprehensive income for the year 317.3 103.9
------------------------------------------------------ ----- ---------- ----------
Attributable to
Owners of the parent 317.5 104 .0
Non-controlling interests (0.2) (0.1)
------------------------------------------------------ ----- ---------- ----------
The exchange gains of GBP43.9m (2021: losses of GBP72.7m)
includes losses of GBP8.6m (2021: gains of GBP19.9m) which relate
to net investment hedges.
Consolidated Balance Sheet
31 March 31 March
2022 2021
GBPm GBPm
--------------------------------------------- -------- --------
Non-current assets
Goodwill 908.7 808.5
Other intangible assets 325.2 290.0
Property, plant and equipment 194.0 180.8
Interest in associates and other investments 8.2 9.3
Retirement benefit asset 31.1 -
Tax receivable 14.7 13.9
Deferred tax asset 2.4 1.3
--------------------------------------------- -------- --------
1,484.3 1,303.8
--------------------------------------------- -------- --------
Current assets
Inventories 228.8 167.8
Trade and other receivables 325.1 268.0
Tax receivable 0.7 2.5
Cash and bank balances 157.4 134.1
Derivative financial instruments 0.7 1.7
--------------------------------------------- -------- --------
712.7 574.1
--------------------------------------------- -------- --------
Total assets 2,197.0 1,877.9
--------------------------------------------- -------- --------
Current liabilities
Trade and other payables 242.7 186.7
Borrowings 72.5 3.0
Lease liabilities 15.5 13.3
Provisions 20.7 35.4
Tax liabilities 11.6 8.9
Derivative financial instruments 0.9 0.7
--------------------------------------------- -------- --------
363.9 248.0
--------------------------------------------- -------- --------
Net current assets 348.8 326.1
--------------------------------------------- -------- --------
Non-current liabilities
Borrowings 287.6 322.3
Lease liabilities 56.6 51.7
Retirement benefit obligations 0.6 22.5
Trade and other payables 19.0 16.8
Provisions 7.7 8.4
Deferred tax liabilities 58.5 40.6
--------------------------------------------- -------- --------
430.0 462.3
--------------------------------------------- -------- --------
Total liabilities 793.9 710.3
--------------------------------------------- -------- --------
Net assets 1,403.1 1,167.6
--------------------------------------------- -------- --------
Equity
Share capital 38.0 38.0
Share premium account 23.6 23.6
Own shares (30.7) (20.9)
Capital redemption reserve 0.2 0.2
Hedging reserve (0.4) 0.7
Translation reserve 117.1 73.2
Other reserves (19.9) (13.6)
Retained earnings 1,274.8 1,065.8
--------------------------------------------- -------- --------
Equity attributable to owners of the Company 1,402.7 1,167.0
--------------------------------------------- -------- --------
Non-controlling interests 0.4 0.6
--------------------------------------------- -------- --------
Total equity 1,403.1 1,167.6
--------------------------------------------- -------- --------
The financial statements of Halma plc, company number 00040932,
were approved by the Board of Directors on 16 June 2022.
Andrew Williams Marc Ronchetti
Director Director
Consolidated Statement of Changes in Equity
Share Capital Non-
Share premium Own redemption Hedging Translation Other Retained controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
At 1 April
2021 38.0 23.6 (20.9) 0.2 0.7 73.2 (13.6) 1,065.8 0.6 1,167.6
Profit for the
year - - - - - - - 244.4 (0.2) 244.2
Other
comprehensive
income and
expense - - - - (1.1) 43.9 (1.7) 32.0 - 73.1
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
Total
comprehensive
income and
expense - - - - (1.1) 43.9 (1.7) 276.4 (0.2) 317.3
Dividends paid - - - - - - - (68.7) - (68.7)
Share-based
payment
charge - - - - - - 12.2 - - 12.2
Deferred tax
on
share-based
payment
transactions - - - - - - (0.2) - - (0.2)
Excess tax
deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1.3 - 1.3
Purchase of
own
shares - - (19.3) - - - - - - (19.3)
Performance
share
plan awards
vested - - 9.5 - - - (16.6) - - (7.1)
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
At 31 March
2022 38.0 23.6 (30.7) 0.2 (0.4) 117.1 (19.9) 1,274.8 0.4 1,403.1
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
Share Capital Non-
Share premium Own redemption Hedging Translation Other Retained controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- --------
At 1 April
2020 38.0 23.6 (14.3) 0.2 (0.1) 148.7 (7.7) 949.2 (0.7) 1,136.9
Profit for the
year - - - - - - - 203.4 (0.1) 203.3
Other
comprehensive
income and
expense - - - - 0.8 (75.5) - (24.7) - (99.4)
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- --------
Total
comprehensive
income and
expense - - - - 0.8 (75.5) - 178.7 (0.1) 103.9
Dividends paid - - - - - - - (63.7) - (63.7)
Share-based
payment
charge - - - - - - 11.9 - - 11.9
Deferred tax
on
share-based
payment
transactions - - - - - - (0.4) - - (0.4)
Excess tax
deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1.6 - 1.6
Purchase of
own
shares - - (16.2) - - - - - - (16.2)
Performance
share
plan awards
vested - - 9.6 - - - (17.4) - - (7.8)
Adjustments to
non-
controlling
interest
arising
on
acquisition - - - - - - - - 1.4 1.4
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- --------
At 31 March
2021 38.0 23.6 (20.9) 0.2 0.7 73.2 (13.6) 1,065.8 0.6 1,167.6
-------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- --------
Own shares are ordinary shares in Halma plc purchased by the
Company and held to fulfil the Company's obligations under the
Group's share plans. At 31 March 2022 the number of shares held by
the Employee Benefit Trust was 1,175,080 (2021: 891,622).
The market value of own shares was GBP29.5m (2021:
GBP21.2m).
The Translation reserve is used to record the difference arising
from the retranslation of the financial statements of foreign
operations. The Hedging reserve is used to record the portion of
the cumulative net change in fair value of cash flow hedging
instruments that are deemed to be an effective hedge.
The Capital redemption reserve was created on repurchase and
cancellation of the Company's own shares. The Other reserves
represent the provision for the value of the Group's equity-settled
share plans.
Consolidated Cash Flow Statement
Year ended Year ended
31 March 31 March
2022 2021
Notes GBPm GBPm
---------------------------------------------------- ----- ---------- ----------
Net cash inflow from operating activities 10 237.4 277.6
---------------------------------------------------- ----- ---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment -
owned assets (25.2) (22.8)
Purchase of computer software (0.9) (2.8)
Purchase of other intangibles (0.5) (1.2)
Proceeds from sale of property, plant and equipment
and capitalised development costs 1.1 0.9
Development costs capitalised (13.4) (15.4)
Interest received 0.2 0.8
Acquisition of businesses, net of cash acquired 8 (152.8) (46.4)
Disposal of business, net of cash disposed 9 57.5 26.1
Purchase of equity investments (0.7) (3.4)
---------------------------------------------------- ----- ---------- ----------
Net cash used in investing activities (134.7) (64.2)
---------------------------------------------------- ----- ---------- ----------
Cash flows from financing activities
Dividends paid (68.7) (63.7)
Purchase of own shares (19.3) (16.2)
Interest paid (8.2) (10.0)
Proceeds from bank borrowings 10 161.4 129.4
Repayment of bank borrowings 10 (132.5) (136.7)
Repayment of loan notes 10 - (72.2)
Repayment of lease liabilities, net of interest (14.6) (14.1)
---------------------------------------------------- ----- ---------- ----------
Net cash used in financing activities (81.9) (183.5)
---------------------------------------------------- ----- ---------- ----------
Increase in cash and cash equivalents 10 20.8 29.9
Cash and cash equivalents brought forward 131.1 105.4
Exchange adjustments 4.8 (4.2)
---------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents carried forward 10 156.7 131.1
---------------------------------------------------- ----- ---------- ----------
Year ended Year ended
31 March 31 March
2022 2021
Notes GBPm GBPm
---------------------------------------------------- ----- ---------- ----------
Reconciliation of net cash flow to movement
in net debt
Increase in cash and cash equivalents 20.8 29.9
Net cash (inflow)/outflow from (drawdown)/repayment
of bank borrowings 10 (28.9) 7.3
Loan notes repaid 10 - 72.2
Lease liabilities additions and accretion of
interest (19.0) (25.0)
Lease liabilities acquired (4.6) (0.5)
Lease liabilities disposed of 2.1 1.8
Lease liabilities and interest repaid 10 16.8 16.4
Exchange adjustments (5.8) 17.0
---------------------------------------------------- ----- ---------- ----------
(Increase)/decrease in net debt (18.6) 119.1
---------------------------------------------------- ----- ---------- ----------
Net debt brought forward (256.2) (375.3)
---------------------------------------------------- ----- ---------- ----------
Net debt carried forward (274.8) (256.2)
---------------------------------------------------- ----- ---------- ----------
Accounting Policies
Basis of presentation
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. Halma
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1 April 2021. This change
constitutes a change in accounting framework. However, there is no
impact on recognition, measurement or disclosure in the period
reported as a result of the change in framework.
The consolidated financial statements of Halma have been
prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
The principal Group accounting policies are explained below and
have been applied consistently throughout the years ended 31 March
2022 and 31 March 2021, other than those noted below.
The Group accounts have been prepared under the historical cost
convention, except as described below under the headings
'Derivative financial instruments and hedge accounting', 'Financial
assets at fair value through other comprehensive income (FVOCI)',
'Pensions' and 'Business combinations and goodwill'.
New Standards and Interpretations applied for the first time in
the year ended 31 March 2022
The following Standards with an effective date of 1 January 2021
and 1 April 2021 respectively, have been adopted without any
significant impact on the amounts reported in these financial
statements:
- Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
- COVID-19 Related Rent Concessions - Amendment to IFRS 16
In April 2021 the IFRS IC published its final agenda decision on
Configuration and Customisation ('CC') costs in a Cloud Computing
Arrangement. The agenda decision considers how a customer accounts
for configuration or customisation costs where an intangible asset
is not recognised in a cloud computing arrangement. The agenda
decision impacts the Group in respect of the current year with the
updated policy for software costs included under the Other
intangible assets accounting policy below. There was no impact on
the numbers reported in the prior year.
New Standards and Interpretations not yet applied
At the date of authorisation of these financial statements, the
following Standards and Interpretations that are potentially
relevant to the Group, and which have not been applied in these
financial statements, were in issue but not yet effective (and in
some cases had not yet been adopted by the UK):
- Reference to the Conceptual Framework - Amendments to IFRS
3
- Property, Plant and Equipment: Proceeds before intended use -
Amendments to IAS 16
- Onerous Contracts - Costs of Fulfilling a Contract -
Amendments to IAS 37
- IFRS 17 Insurance Contracts
- Classification of Liabilities as Current or Non-current -
Amendments to IAS 1
- Definition of Accounting Estimates - Amendments to IAS 8
- Disclosure of Accounting Policies - Amendments to IAS 1 and
IFRS Practice Statement 2
- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements of the Group.
Use of Alternative performance measures (APMs)
In the reporting of the financial information, the Group uses
certain measures that are not required under IFRS, the Generally
Accepted Accounting Principles (GAAP) under which the Group
reports. The Directors believe that Return on Total Invested
Capital (ROTIC), Return on Capital Employed (ROCE), Organic growth
at constant currency, Adjusted profit and earnings per share
measures and Adjusted operating cash flow provide additional and
more consistent measures of underlying performance to shareholders
by removing non-trading items that are not closely related to the
Group's trading or operating cash flows. These and other
alternative performance measures are used by the Directors for
internal performance analysis and incentive compensation
arrangements for employees. The terms ROTIC, ROCE, organic growth
at constant currency and 'adjusted' are not defined terms under
IFRS and may therefore not be comparable with similarly titled
measures reported by other companies. They are not intended to be a
substitute for, or superior to, GAAP measures.
The principal items which are included in adjusting items are
set out below in the Group's accounting policy and in note 1. The
term 'adjusted' refers to the relevant measure being reported for
continuing operations excluding adjusting items.
Definitions of the Group's material alternative performance
measures along with reconciliation to their IFRS equivalent measure
are included in note 3.
Key accounting policies
Below we set out our key accounting policies, with a list of all
other accounting policies thereafter.
Going concern
The Group's business activities, together with the main trends
and factors likely to affect its future development, performance
and position, and the financial position of the Group as at 31
March 2022, its cash flows, liquidity position and borrowing
facilities are set out in the Strategic Report. In addition, the
Annual Report and Accounts 2022 contains further information
concerning the security, currency, interest rates and maturity of
the Group's borrowings.
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis the Directors have
considered all of the above factors, including potential scenarios
and its principal risks set out above. Under the potential
scenarios considered, which includes a severe but plausible
downside scenario, the Group remains within its debt facilities and
the attached financial covenants for the foreseeable future and the
Directors therefore believe, at the time of approving the financial
statements, that the Company is well placed to manage its business
risks successfully and remains a going concern. The key facts and
assumptions in reaching this determination are summarised
below.
Our financial position remains robust with committed facilities
at the balance sheet date totalling approximately GBP670m which
includes a GBP550m Revolving Credit Facility (RCF). In May 2022 the
RCF was refinanced and now matures in May 2027 with two one-year
extension options. During May 2022, the Group also entered into a
Note Purchase Agreement which provides access to loan notes
totalling GBP330m, to be drawn in various currencies in July 2022
subject to certain conditions. The Group is confident that these
conditions will be satisfied and thus the GBP330m loan notes form
part of the available facilities in the Group's Going Concern and
Viability assessments. The financial covenants across the
facilities are for leverage (net debt/adjusted EBITDA) of not more
than three and a half times and for adjusted interest cover of not
less than four times.
Our base case scenario has been prepared using forecasts from
each of our Operating Companies as well as cash outflows on
acquisitions in line with pre COVID-19 levels. In addition, a
severe but plausible downside scenario has been modelled showing a
decline in trading for the year ending 31 March 2023 to below
levels seen for the year ended 31 March 2022. This reduction in
trading could be caused by further significant, unexpected COVID-19
impacts or another significant downside event. In mitigating the
impacts of the downside scenario there are actions that can be
taken which are entirely discretionary to the business such as
acquisitions spend and dividend growth rates. In addition, the
Group has demonstrated strong resilience and flexibility during the
COVID pandemic in managing overheads which could be used to further
mitigate the impacts of the downside scenario. The scenarios
modelled cover a period of greater than 12 months from the date of
the financial statements.
Neither the base case nor severe but plausible downside
scenarios result in a breach of the Group's available debt
facilities or the attached covenants and, accordingly, the
Directors believe there is no material uncertainty in the use of
the going concern assumption and, therefore, deem it appropriate to
continue to adopt the going concern basis of accounting for at
least the next 12-month period.
Business combinations and goodwill
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group. The Group measures goodwill at
the acquisition date as:
- the fair value of the consideration transferred; plus
- the recognised amount of any non-controlling interests in the
acquiree measured at the proportionate share of the value of net
identifiable assets acquired; plus
- the fair value of the existing equity interest in the
acquiree; less
- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
Costs related to the acquisition, other than those associated
with the issue of debt or equity securities, are expensed as
incurred. Any contingent consideration payable may be accounted for
as either:
a) Consideration transferred, which is recognised at fair value
at the acquisition date. If the contingent purchase consideration
is classified as equity, it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes to the
fair value of the contingent purchase consideration are recognised
in the Consolidated Income Statement; or
b) Remuneration, which is expensed in the Consolidated Income
Statement over the associated period of service. An indicator of
such treatment includes when payments to employees of the acquired
company are contingent on a post-acquisition event, but may be
automatically forfeited on termination of employment.
For acquisitions between 4 April 2004 (the date from which the
financial statements were reported under IFRS) and 2 April 2010,
goodwill represents the difference between the cost of the
acquisition, including acquisition costs and the fair value of the
net identifiable assets acquired. Goodwill has an indefinite
expected useful life and is not amortised, but is tested annually
for impairment.
Goodwill is recognised as an intangible asset in the
Consolidated Balance Sheet. Goodwill therefore includes
non-identified intangible assets including business processes,
buyer-specific synergies, know-how and workforce-related
industry-specific knowledge and technical skills. Negative goodwill
arising on acquisitions would be recognised directly in the
Consolidated Income Statement. On closure or disposal of an
acquired business, goodwill would be taken into account in
determining the profit or loss on closure or disposal.
As permitted by IFRS 1, the Group elected not to apply IFRS 3
'Business Combinations' to acquisitions prior to 4 April 2004 in
its consolidated accounts. As a result, the net book value of
goodwill recognised as an intangible asset under UK GAAP at 3 April
2004 was brought forward unadjusted as the cost of goodwill
recognised under IFRS at 4 April 2004 subject to impairment testing
on that date; and goodwill that was written off to reserves prior
to 28 March 1998 under UK GAAP will not be taken into account in
determining the profit or loss on disposal or closure of previously
acquired businesses from 4 April 2004 onwards.
Payments for contingent consideration are classified as
investing activities within the Consolidated Cash Flow Statement,
except for amounts paid in excess of that estimated in the
acquisition balance sheets which are recognised in the net cash
inflow from operating activities in the year together with
movements in contingent consideration provisions charged/credited
to the Consolidated Income Statement which is included as a
reconciling item between operating profit and cash inflow from
operating activities.
Intangible assets
(a) Acquired intangible assets
An intangible resource acquired with a subsidiary undertaking is
recognised as an intangible asset if it is separable from the
acquired business or arises from contractual or legal rights, is
expected to generate future economic benefits and its fair value
can be measured reliably. Acquired intangible assets, comprising
trademarks, technology and know-how and customer relationships, are
amortised through the Consolidated Income Statement on a
straight-line basis over their estimated economic lives of between
four and 20 years. The carrying value of intangible assets is
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable.
(b) Product development costs
Research expenditure is charged to the Consolidated Income
Statement in the financial year in which it is incurred.
Development expenditure is expensed in the financial year in
which it is incurred, unless it relates to the development of a new
or substantially improved product, is incurred after the technical
feasibility and economic viability of the product has been proven
and the decision to complete the development has been taken, and
can be measured reliably. Such expenditure, meeting the recognition
criteria of IAS 38 'Intangible Assets', is capitalised as an
intangible asset in the Consolidated Balance Sheet at cost and is
amortised through the Consolidated Income Statement on a
straight-line basis over its estimated economic life of three
years.
Pensions
The Group makes contributions to various pension plans.
For defined benefit plans, the asset or liability recorded in
the Consolidated Balance Sheet is the difference between the fair
value of the plan's assets and the present value of the defined
obligation at that date. The defined benefit obligation is
calculated separately for each plan on an annual basis by
independent actuaries using the projected unit credit method.
Actuarial gains and losses are recognised in full in the period
in which they occur and are taken to other comprehensive
income.
Current and past service costs, along with the impact of any
settlements or curtailments, are charged to the Consolidated Income
Statement. The net interest expense on pension plans' liabilities
and the expected return on the plans' assets is recognised within
finance expense in the Consolidated Income Statement.
Contributions to defined contribution plans are charged to the
Consolidated Income Statement in the period the expense relates
to.
Impairment of trade and other receivables
The Group assesses on a forward-looking basis the expected
credit losses associated with its trade and other receivables
carried at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase in credit
risk.
The Group applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised from
initial recognition of the receivables. In order to estimate the
expected lifetime losses, the Group categorises its customers into
groups with similar risk profiles and determines the historic rates
of impairment for each of those categories of customer. The Group
then adjusts the risk profile for each group of customers by using
forward looking information, such as the government risk of default
for the country in which those customers are located, and
determines an overall probability of impairment for the total trade
and other receivables at the balance sheet date.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of Group accounts in conformity with IFRS
requires the Directors to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experiences and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
In preparing the Consolidated Financial Statements management
has considered the impact of climate change, particularly in the
context of the disclosures included in the Strategic Report and the
stated net zero ambitions. These considerations did not have a
material impact on the financial reporting judgements and estimates
in the current year. Climate change is not expected to have a
significant impact on the Group's going concern assessment as at
March 2022 nor the viability of the Group over the next three
years.
The following areas of critical accounting judgement and key
estimation uncertainty have been identified as having significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities:
Critical accounting judgements
Goodwill impairment CGU groups
Determining whether goodwill is impaired requires management's
judgement in assessing cash generating unit (CGU) groups to which
goodwill should be allocated. Management allocates a new
acquisition to a CGU group based on which one is expected to
benefit most from that business combination. The allocation of
goodwill to existing CGU groups is generally straightforward and
factual, however over time as new businesses are acquired and
management reporting structures change management reviews the CGU
groups to ensure they are still appropriate. There have been no
changes to the CGU groups in the current year.
Recoverability of non-current taxation assets
In the current year, determining the recoverability of tax
assets requires management's judgement in assessing the amounts
paid in relation to group financing partial exemption applicable to
UK controlled foreign companies as a result of the decision by the
European Commission that this constitutes state aid. Management's
assessment is that this represents a contingent liability and that
the GBP14.7m paid to HM Revenue & Customs (HMRC) in the current
and prior year, included within non-current assets on the
Consolidated Balance Sheet, will ultimately be recovered.
Key sources of estimation uncertainty
Contingent consideration changes in estimates
Determining the value of contingent consideration recognised as
part of the acquisition of a business requires management to
estimate the expected performance of the acquired business and the
amount of contingent consideration that will therefore become
payable. Initial estimates of expected performance are made by the
management responsible for completing the acquisition and form a
key component of the financial due diligence that takes place prior
to completion. Subsequent measurement of contingent consideration
is based on the Directors' appraisal of the acquired business's
performance in the post-acquisition period and the agreement of
final payments.
Intangible assets
IFRS 3 (revised) 'Business Combinations' requires that goodwill
arising on the acquisition of subsidiaries is capitalised and
included in intangible assets. IFRS 3 (revised) also requires the
identification and valuation of other separable intangible assets
at acquisition. The assumptions involved in valuing these
intangible assets require the use of management estimates.
IAS 38 'Intangible Assets' requires that development costs,
arising from the application of research findings or other
technical knowledge to a plan or design of a new or substantially
improved product, are capitalised, subject to certain criteria
being met. Determining the technical feasibility and estimating the
future cash flows generated by the products in development requires
the use of management estimates.
The estimates made in relation to both acquired intangible
assets and capitalised development costs include identification of
relevant assets, future growth rates, expected inflation rates and
the discount rate used. Management also make estimates of the
useful economic lives of the intangible assets. Management engages
third party specialists to assist with the valuation assumption in
respect of acquired intangible assets.
Goodwill impairment future cash flows
The 'value in use' calculation used to test for impairment of
goodwill involves an estimation of the present value of future cash
flows of CGU groups. The future cash flows are based on annual
budgets and forecasts of CGUs, as approved by the Board, to which
management's expectation of market-share and long-term growth rates
are applied. The present value is then calculated based on
management's estimate of future discount and growth rates. The
Board reviews these key assumptions (operating assumption,
long-term growth rates, and discount rates) and the sensitivity
analysis around these assumptions. Management believes that there
is no reasonably possible change in any of the key assumptions that
would cause the carrying value of any CGU group to exceed its
recoverable amount.
Defined benefit pension plan liabilities
Determining the value of the future defined benefit
asset/obligation requires estimation in respect of the assumptions
used to calculate present values of plan liabilities. The
significant assumptions utilised in the calculations are future
mortality, discount rate and inflation. Management determines these
assumptions in consultation with an independent actuary.
Other accounting policies
Basis of consolidation
The Group accounts include the accounts of Halma plc and all of
its subsidiary companies made up to 31 March 2022, adjusted to
eliminate intra-Group transactions, balances, income and expenses.
The results of subsidiary companies acquired or disposed are
included from the month of their acquisition or to the month of
their disposal.
Segmental reporting
An operating segment is a distinguishable component of the Group
that is engaged in business activities from which it may earn
revenues and incur expenses, and whose operating results are
reviewed regularly by the Chief Operating Decision Maker (the Group
Chief Executive) to make decisions about resources to be allocated
to the segment and assess its performance, and for which discrete
financial information is available.
Reportable segments are operating segments that either meet the
thresholds and conditions set out in IFRS 8 or are considered by
the Board to be appropriately designated as reportable segments.
Segment result represents operating profits and includes an
allocation of Head Office expenses. Segment result excludes tax and
financing items. Segment assets comprise goodwill, other intangible
assets, property, plant and equipment and Right-of-Use assets
(excluding land and buildings), inventories, trade and other
receivables. Segment liabilities comprise trade and other payables,
provisions and other payables. Unallocated items represent land and
buildings (including Right-of-Use assets), corporate and deferred
taxation balances, defined benefit plan asset/obligation,
contingent purchase consideration, all components of net
cash/borrowings, lease liabilities and derivative financial
instruments.
From 1 April 2021, the Group aligned its organisational
structure and financial reporting with its purpose and focus on
safety, environmental and health markets. The Group now has three
main reportable segments (Safety, Environmental & Analysis and
Medical), which are defined by markets rather than product type.
Each segment includes businesses with similar operating and market
characteristics and are consistent with the internal reporting as
reviewed by the Group Chief Executive.
Revenue
The Group's revenue streams are the sale of goods and services
in the specialist safety, environmental technologies and health
markets. The revenue streams are disaggregated into three sectors,
that serve like markets. Those sectors are Safety, Environmental
& Analysis and Medical.
Revenue is recognised at the point of the transfer of control
over promised goods or services to customers in an amount that
reflects the amount of consideration specified in a contract with a
customer, to which the Group expects to be entitled in exchange for
those goods or services.
It is the Group's judgement that in the majority of sales there
is no contract until such time as the Operating Company satisfies
its performance obligation, at which point the contract becomes the
Operating Company's terms and conditions resulting from the
supplier's purchase order. Where there are Master Supply
Arrangements, these are typically framework agreements and do not
contain clauses that would result in a contract forming under IFRS
15 until a Purchase Order is issued by the customer.
Revenue represents sales, net of estimates for variable
consideration, including rights to returns, and discounts, and
excluding value added tax and other sales related taxes. The amount
of variable consideration is not considered to be material to the
Group as a whole. The transaction price is allocated to each
performance obligation on a relative standalone selling price
basis.
Performance obligations are unbundled in each contractual
arrangement if they are distinct from one another. There is
judgement in identifying distinct performance obligations where the
product could be determined to be a system, or where a combination
of products and services are provided together. For the majority of
the Group's activities the performance obligation is judged to be
the component product or service rather than the system or combined
products and services. The contract price is allocated to the
distinct performance obligations based on the relative standalone
selling prices of the goods or services.
The way in which the Group satisfies its performance obligations
varies by business and may be on shipment, delivery, as services
are rendered or on completion of services depending on the nature
of product and service and terms of the contract which govern how
control passes to the customer. Revenue is recognised at a point in
time or over time as appropriate.
Where the Group offers warranties that are of a service nature,
revenue is recognised in relation to these performance obligations
over time as the services are rendered. In our judgement we believe
the associated performance obligations accrue evenly across the
contractual term and therefore revenue is recognised on a pro-rated
basis over the length of the service period.
In a small number of instances across the Group, products have
been determined to be bespoke in nature, with no alternative use.
Where there is also an enforceable right to payment for work
completed, the criteria for recognising revenue over time have been
deemed to have been met. Revenue is recognised on an input basis as
work progresses. Progress is measured with reference to the actual
cost incurred as a proportion of the total costs expected to be
incurred under the contract. This is not a significant part of the
Group's business as for the most part, where goods are bespoke in
nature, it is the Group's judgement that the product can be broken
down to standard component parts with little additional cost and
therefore has an alternate use, or there is no enforceable right to
payment for work performed. In these cases, the judgement is made
that the requirements for recognising revenue over time are not met
and revenue is recognised when control of the finished product
passes to the customer.
The Group applies the practical expedient in IFRS 15 (paragraph
63) and does not adjust the promised amount of consideration for
the effects of a significant financing component if the Group
expects, at contract inception, that the period between the
transfer of a promised good or service to a customer and when the
customer pays for that good or service will be one year or
less.
Operating profit
Operating profit is presented net of direct production costs,
production overheads, selling costs, distribution costs and
administrative expenditure. Operating profit is stated after
charging restructuring costs but before the share of results of
associates, profit or loss on disposal of operations, finance
income and finance costs.
Adjusting items
When items of income or expense are material and they are
relevant to an understanding of the entity's financial performance,
they are disclosed separately within the financial statements. Such
adjusting items include costs or reversals arising from
acquisitions or disposals of businesses, including acquisition
costs, creation or reversals of provisions related to changes in
estimates for contingent consideration on acquisition, amortisation
of acquired intangible assets, and other significant one-off items
that may arise.
Deferred government grant income
Government grant income that is linked to capital expenditure is
deferred to the Consolidated Balance Sheet and credited to the
Consolidated Income Statement over the life of the related asset.
In addition, the Group claims research and development expenditure
credits arising on qualifying expenditure and shows these 'above
the line' in operating profit. Where the credits arise on
expenditure that is capitalised as part of internally generated
capitalised development costs, the income is deferred to the
Consolidated Balance Sheet and credited to the Consolidated Income
Statement over the life of the related asset in line with the
policy stated above.
Finance income and expenses
The Group recognises interest income or expense using the
effective interest rate method. Finance income and finance costs
include:
- Interest payable on loans and borrowings.
- Net interest charge on pension plan liabilities.
- Amortisation of finance costs.
- Interest receivable in respect of cash and cash
equivalents.
- Unwinding of the discount on provisions.
- Fair value movements on derivative financial instruments.
Taxation
Taxation comprises current and deferred tax. Tax is recognised
in the Consolidated Income Statement except to the extent that it
relates to items recognised directly in Total equity, in which case
it too is recognised in Total equity. Current tax is the expected
tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the balance sheet date, along
with any adjustment to tax payable in respect of previous years.
Taxable profit differs from net profit as reported in the
Consolidated Income Statement because it excludes items that are
never taxable or deductible.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes and is
accounted for using the balance sheet liability method, apart from
the following differences which are not provided for: goodwill not
deductible for tax purposes; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit; and
differences relating to investments in subsidiaries to the extent
they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amounts of assets and
liabilities, using tax rates and laws, which are expected to apply
in the year when the liability is settled, or the asset is
realised. Deferred tax assets are only recognised to the extent
that recovery is probable.
Foreign currencies
The Group presents its accounts in Sterling. Transactions in
foreign currencies are recorded at the rate of exchange at the date
of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are reported at the
rates prevailing at that date. Non-monetary assets and liabilities
denominated in foreign currencies are measured in terms of
historical costs using the exchange rate at the date of the initial
transaction. Any gain or loss arising on monetary assets and
liabilities from subsequent exchange rate movements is included as
an exchange gain or loss in the Consolidated Income Statement.
Net assets of overseas subsidiary companies are expressed in
Sterling at the rates of exchange ruling at the end of the
financial year, and trading results and cash flows at the average
rates of exchange for the financial year. Goodwill arising on the
acquisition of a foreign business is treated as an asset of the
foreign entity and is translated at the rate of exchange ruling at
the end of the financial year. Exchange gains or losses arising on
these translations are taken to the Translation reserve within
Total equity.
In the event that an overseas subsidiary is disposed of or
closed, the profit or loss on disposal or closure will be
determined after taking into account the cumulative translation
difference held within the Translation reserve attributable to that
subsidiary. As permitted by IFRS 1, the Group has elected to deem
the translation to be GBPnil at 4 April 2004. Accordingly, the
profit or loss on disposal or closure of foreign subsidiaries will
not include any currency translation differences which arose before
4 April 2004.
Other intangible assets
(a) Computer software
Computer software that is not integral to an item of property,
plant or equipment is recognised separately as an intangible asset
and is amortised through the Consolidated Income Statement on a
straight-line basis from the point at which the asset is ready to
use over its estimated economic life of between three and five
years.
Development costs that are directly attributable to the design
and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets where the
following criteria are met:
- it is technically feasible to complete the software so that it
will be available for use;
- management intends to complete the software and use or sell
it;
- there is an ability to use or sell the software;
- it can be demonstrated how the software will generate probable
future economic benefits;
- adequate technical, financial and other resources to complete
the development and to use or sell the software are available;
and
- the expenditure attributable to the software during its
development can be reliably measured.
Where the Group enters into a SaaS cloud computing arrangement
to access software, there are limited cases for capitalisation of
attributable implementation costs. If the arrangement contains a
lease as defined by IFRS 16, lease accounting rules apply including
capitalisation of directly attributable costs. Alternatively,
directly attributable software costs can create an intangible asset
if the software can be controlled by the entity, either through the
option to be run on the entity's or a third-party's infrastructure
or where the development of the software creates customised
software that the entity has exclusive rights to.
(b) Other intangibles
Other intangibles are amortised through the Consolidated Income
Statement on a straight-line basis over their estimated economic
lives of between three and ten years.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less
provisions for accumulated impairment and accumulated depreciation
which, with the exception of freehold land which is not
depreciated, is provided on a straight-line basis over each asset's
estimated economic life. The principal annual rates used for this
purpose are:
Freehold property 2%
------------------------------ -----------------------
Shorter of 2% or period
Leasehold improvements of lease
------------------------------ -----------------------
Plant, equipment and vehicles 8% to 33.3%
------------------------------ -----------------------
Investments in associates
An associate is an entity over which the Group is in a position
to exercise significant influence, but not control or joint
control, through participation in the financial and operating
policy decisions of the investee. Significant influence is the
power to participate in the financial and operating policy
decisions of the investee but without control or joint control over
those policies.
The results and assets and liabilities of associates are
incorporated in these financial statements using the equity method
of accounting. Investments in associates are carried in the
Consolidated Balance Sheet at cost as adjusted by post-acquisition
changes in the Group's share of the net assets of the associate,
less any impairment in the value of individual investments. Losses
of an associate in excess of the Group's interest in that associate
(which includes any long-term interests that, in substance, form
part of the Group's net investment in the associate) are recognised
only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the
associate.
Any excess of the cost of acquisition over the Group's share of
the fair values of the identifiable net assets of the associate at
the date of acquisition is recognised as goodwill. The goodwill is
included within the carrying amount of the investment and is
assessed for impairment as part of that investment. Any deficiency
of the cost of acquisition below the Group's share of the fair
values of the identifiable net assets of the associate at the date
of acquisition (i.e. discount on acquisition) is credited in profit
or loss in the year of acquisition.
Where a Group company transacts with an associate of the Group,
profits and losses are eliminated to the extent of the Group's
interest in the relevant associate. Losses may provide evidence of
an impairment of the asset transferred in which case appropriate
provisioning is made for impairment.
Where the Group disposes of its entire interest in an associate
a gain or loss is recognised in the income statement on the
difference between the amount received on the sale of the associate
less the carrying value and costs of disposal.
Financial assets at fair value through other comprehensive
income
Financial assets at fair value through other comprehensive
income (FVOCI) comprise equity securities which are not held for
trading, and which the Group has irrevocably elected at initial
recognition to recognise as FVOCI. The Group considers this
classification relevant as these are strategic investments.
Financial assets at FVOCI are adjusted to the fair value of the
asset at the balance sheet date with any gain or loss being
recognised in other comprehensive income and held as part of other
reserves. On disposal any gain or loss is recognised in other
comprehensive income and the cumulative gains or losses are
transferred from other reserves to retained earnings.
Impairment of non-current assets
All non-current assets are tested for impairment whenever events
or circumstances indicate that their carrying value may be
impaired. Additionally, goodwill and capitalised development
expenditure relating to a product that is not yet in full
production are subject to an annual impairment test.
An impairment loss is recognised in the Consolidated Income
Statement to the extent that an asset's carrying value exceeds its
recoverable amount, which represents the higher of the asset's
'fair value less costs to dispose' and its 'value in use'. An
asset's 'value in use' represents the present value of the future
cash flows expected to be derived from the asset or from the cash
generating unit to which it relates. The present value is
calculated using a pre-tax discount rate that reflects the current
market assessment of the time value of money and the risks specific
to the asset concerned.
Impairment losses recognised in previous periods for an asset
other than goodwill are reversed if there has been a change in the
estimates used to determine the asset's recoverable amount, but
only to the extent that the carrying amount of the asset does not
exceed its carrying amount had no impairment loss been recognised
in previous periods. Such reversals are recognised in the
Consolidated Income Statement. Impairment losses in respect of
goodwill are not reversed.
Inventories
Inventories and work in progress are included at the lower of
cost and net realisable value. Cost is calculated either on a
'first in, first out' or an average cost basis and includes direct
materials and the appropriate proportion of production and other
overheads considered by the Directors to be attributable to
bringing the inventories to their location and condition at the
year end. Net realisable value represents the estimated selling
price less all estimated costs to complete and costs to be incurred
in marketing, selling and distribution.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits with
an initial maturity of less than three months, and bank overdrafts
that are repayable on demand.
Contract assets and liabilities
A contract asset is recognised when the Group's right to
consideration is conditional on something other than the passage of
time, for example the completion of future performance obligations
under the terms of the contract with the customer.
In some instances, the Group receives payments from customers
based on a billing schedule, as established in the contract, which
may not match with the pattern of performance under the contract. A
contract liability is only recognised on non-cancellable contracts
that provide unconditional rights to payment from the customer for
products and services that the Group has not yet completed
providing or that it will provide in the near future. Where
performance obligations are satisfied ahead of billing then a
contract asset will be recognised.
Contract assets are recognised within Trade and other
receivables and are assessed for impairment on a forward-looking
basis using the expected lifetime losses approach, as required by
IFRS 9 ('Financial Instruments').
Costs to obtain or fulfil a contract
The incremental costs of obtaining a contract with a customer
are capitalised as an asset if the Group expects to recover them.
Costs such as sales commissions may be incurred when the Group
enters into a new contract. Costs to obtain or fulfil a contract
are presented in the Consolidated Balance Sheet as assets until the
performance obligation to which they relate has been met. These
assets are amortised on consistent basis with how the related
revenue is recognised.
The Group applies the practical expedient in IFRS 15 (paragraph
94) and recognises incremental costs of obtaining a contract as an
expense when incurred if the amortisation period of the asset that
the Group would otherwise have recognised is one year or less.
Trade payables
Trade payables are non-interest bearing and are stated at
amortised cost.
Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised
in the Consolidated Balance Sheet at fair value less directly
attributable transaction costs and are subsequently measured at
amortised cost using the effective interest rate method.
Provisions and contingent liabilities
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying
amount is the present value of the cash flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received, and the amount of the
receivable can be measured reliably.
Contingent liabilities are disclosed where a possible obligation
dependent on uncertain future events exists as at the end of the
reporting period or a present obligation for which payment either
cannot be measured or is not considered to be probable is noted.
Contingent liabilities are not accrued for and no contingent
liability is disclosed where the possibility of payment is
considered to be remote.
Derivative financial instruments and hedge accounting
The Group enters into derivative financial instruments to manage
its exposure to foreign exchange rate risk using forward exchange
contracts. The Group continues to apply the requirements of IAS 39
for hedge accounting.
Derivative financial instruments are classified as fair value
through profit and loss (held for trading) unless they are in a
designated hedge relationship.
Derivatives are initially recognised at fair value at the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each balance sheet date. The resulting gain
or loss is recognised in the Consolidated Income Statement, unless
the derivative is designated and effective as a hedging instrument,
in which event the timing of the recognition in the Consolidated
Income Statement depends on the nature of the hedge relationship.
The Group designates certain derivatives as hedges of highly
probable forecast transactions or hedges of foreign currency risk
of firm commitments (cash flow hedges), or hedges of net
investments in foreign operations.
A derivative with a positive fair value is recognised as a
financial asset whereas a derivative with a negative fair value is
recognised as a financial liability. A derivative is presented as a
non-current asset or a non-current liability if the remaining
maturity of the instrument is more than 12 months and it is not
expected to be realised or settled within 12 months. Other
derivatives are presented as current assets or current
liabilities.
Cash flow hedge accounting
The Group designates certain hedging instruments as cash flow
hedges.
At the inception of the hedge relationship, the entity documents
the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instrument has been or is expected to be highly
effective in offsetting changes in fair values or cash flows of the
hedged item.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The gain or loss relating
to the ineffective portion as a result of being over hedged is
recognised immediately in the Consolidated Income Statement.
Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified to the Consolidated Income
Statement in the periods when the hedged item is recognised in the
Consolidated Income Statement. However, when the forecast
transaction that is hedged results in the recognition of a
non-financial asset or a non-financial liability, the gains and
losses previously accumulated in equity are transferred from equity
and included in the initial measurement of the cost of the
non-financial asset or non-financial liability.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for hedge
accounting. Any gain or loss recognised in other comprehensive
income at that time is accumulated in equity and is recognised,
when the forecast transaction is ultimately recognised, in the
Consolidated Income Statement. When a forecast transaction is no
longer expected to occur, the gain or loss accumulated in equity is
recognised immediately in the Consolidated Income Statement.
Net investment hedge accounting
The Group uses foreign currency denominated borrowings as a
hedge against the translation exposure on the Group's net
investment in overseas companies. Where the hedge is fully
effective at hedging, the variability in the net assets of such
companies caused by changes in exchange rates and the changes in
value of the borrowings are recognised in the Consolidated
Statement of Comprehensive Income and accumulated in the
Translation reserve. The ineffective part of any change in value
caused by changes in exchange rates is recognised in the
Consolidated Income Statement.
Leases
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. Where the Group determines the contract
is, or contains, a lease a right-of-use asset and a lease liability
is recognised at the lease commencement date.
The lease term is determined from the commencement date of the
lease and covers the non-cancellable term. If the Group has an
extension option, which it considers reasonably certain to
exercise, then the lease term will be considered to extend beyond
that non-cancellable period. If the Group has a termination option,
which it considers it reasonably certain to exercise, then the
lease term will be considered to be until the point the termination
option will take effect. The group deem that it is not reasonably
certain to exercise an extension option or a termination option
with an exercise date past the planning horizon of five years.
The right-of-use asset is initially measured at cost, comprising
the initial amount of the lease liability plus any initial direct
costs incurred and an estimate of costs to restore the underlying
asset, less any lease incentives received. The right-of-use asset
is subsequently depreciated using the straight-line method from the
commencement date to the end of the lease term unless the
right-of-use asset is deemed to have a useful life shorter than the
lease term. The Group has taken the practical expedient to not
separate lease and non-lease components and so account for both as
a single lease component.
The right-of-use assets are also subject to impairment testing
under IAS 36. Refer to the previous section on Impairment of
non-current assets for further details.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the incremental borrowing rate. The lease payments
include fixed payments (including in-substance fixed payments) less
any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under
residual value guarantees. Variable lease payments that depend on
an index or a rate, and amounts expected to be paid under residual
value guarantees are not material to the group. The lease payments
also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties for
terminating the lease, if the lease term reflects the Group
exercising the option to terminate. Variable lease payments that do
not depend on an index or a rate are recognised as expenses (unless
they are incurred to produce inventories) in the period in which
the event or condition that triggers the payment occurs. The lease
liability is measured at amortised cost using the effective
interest method by increasing the carrying amount to reflect
interest on the lease liability and by reducing the carrying amount
to reflect the lease payments made. The lease liability is
remeasured when there is a change in future lease payments arising
from a change in an index or a rate or a change in the Group's
assessment of whether it will exercise an extension or termination
option. When the lease liability is remeasured, a corresponding
adjustment is made to the right-of-use asset.
Payments associated with short-term leases or low-value assets
are recognised on a straight-line basis as an expense in the
Consolidated Income Statement. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets mostly comprise
of IT equipment and small items of office furniture. Lease payments
for short-term leases, low-value assets and variable lease payments
not included in the measurement of the lease liability are
classified as cash flows from operating activities within the
consolidated cash flow statement. The Group has classified the
principal and interest portions of lease payments within financing
activities.
Employee share plans
Share-based incentives are provided to employees under the
Group's share incentive plan, the performance share plan and the
executive share plan.
(a) Share incentive plan
Awards of shares under the share incentive plan are made to
qualifying employees depending on salary and service criteria. The
shares awarded under this plan are purchased in the market by the
plan's trustees at the time of the award, and are then held in
trust for a minimum of three years. The costs of this plan are
recognised in the Consolidated Income Statement over the three-year
vesting period of the awards.
(b) Executive share plan
Under the Executive share plan, awards of shares are made to
Executive Directors and certain senior employees participate.
Grants under this plan are in the form of Performance Awards or
Deferred Share Awards.
Performance Awards are subject to non-market-based vesting
criteria, and Deferred Share Awards are subject only to continuing
service of the employee. Share awards are equity-settled. The fair
value of the awards at the date of grant, which is estimated to be
equal to the market value, is charged to the Consolidated Income
Statement on a straight-line basis over the vesting period, with
appropriate adjustments being made during this period to reflect
expected and actual forfeitures. The corresponding credit is to
Other reserves within Total equity.
(c) Cash-settled
For cash-settled awards, a liability equal to the portion of the
services received is recognised at the current fair value
determined at each balance sheet date.
Dividends
Dividends payable to the Company's shareholders are recognised
as a liability in the period in which the distribution is approved
by the Company's shareholders.
Notes to the Accounts
1 Segmental analysis and revenue from contracts with
customers
Sector analysis and disaggregation of revenue
From 1 April 2021, the Group aligned its organisational
structure and financial reporting with its purpose and focus on
safety, environmental and health markets. The Group now has three
main operating and reportable segments (Safety, Environmental &
Analysis and Medical), which are defined by markets rather than
product type. Each segment includes businesses with similar
operating and market characteristics. These segments are consistent
with the internal reporting as reviewed by the Group Chief
Executive.
Nature of goods and services
The following is a description of the principal activities -
separated by reportable segments, which are defined by markets
rather than product type - from which the Group generates its
revenue.
Further disaggregation of sector revenue by geography and by the
pattern of revenue recognition depicts how economic factors affect
the timing and uncertainty of the Group's revenues.
Safety sector generates revenue from providing products that
protect people, property and assets and enable safe movement in
public spaces. Products include: fire detection systems; specialist
fire suppression systems; elevator safety systems; security
sensors; people and vehicle flow technologies; specialised
interlocks that control critical processes safely; and explosion
protection and corrosion monitoring systems. Products are generally
sold separately, with contracts typically less than one year in
length. Warranties are typically of an assurance nature. Revenue is
recognised as control passes on delivery or despatch.
Payment is typically due within 60 days of invoice, except where
a retention is held for documentation.
Environmental & Analysis generates revenue providing
products and technologies that monitor and protect the environment,
ensuring the quality and availability of life-critical resources,
and use optical and imaging technologies in materials analysis.
Products include: market-leading optical, optoelectronic and
spectral imaging systems; water, air and gases monitoring
technologies; instruments that detect hazardous gases and analyse
air quality and systems for water analysis and treatment. Products
and services are generally sold separately. Warranties are
typically of an assurance nature, but some companies within the
Group offer extended warranties. Depending on the nature of the
performance obligation, revenue may be recognised as control passes
on delivery, despatch or as the service is delivered. Contracts are
typically less than one year in length, but some companies have
contracts where certain service-related performance obligations are
delivered over a number of years; this can result in contract
liabilities where those performance obligations are invoiced ahead
of performance.
Payment is typically due within 60 days of invoice.
Medical sector generates revenue from providing products and
services that enhance the quality of life for patients and improve
quality of care delivered by healthcare providers. Products
include: critical fluidic components used by medical diagnostics
and Original Equipment Manufacturers (OEMs), laboratory devices and
systems that provide valuable information to understand patient
health and enable providers to make decisions across the continuum
of care; technologies and solutions to enable in-vitro diagnostic
systems and life-science discoveries and development; and
technologies that enable positive outcomes across clinical
specialties. Products are generally sold separately, and warranties
are typically of an assurance nature. Depending on the nature of
the performance obligation, revenue is recognised as control passes
on delivery or despatch or as the service is delivered. Contracts
are typically less than one year in length, but a limited number of
companies have contracts where certain service-related performance
obligations are delivered over a number of years; this can result
in contract liabilities where those performance obligations are
invoiced ahead of performance.
Payment is typically due within 60 days of invoice.
Segment revenue disaggregation (by location of external
customer)
Year ended 31 March 2022
Revenue by sector and destination (all continuing
operations)
Africa,
Near and
United States Mainland United Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------- -------- -------- ------------ --------- ---------- -------
Safety 164.6 180.0 147.0 101.8 29.4 18.6 641.4
Environmental
& Analysis 209.6 56.7 77.6 78.4 12.3 8.3 442.9
Medical 224.3 71.4 42.4 70.6 11.9 21.7 442.3
Inter-segmental
sales (1.3) - - - - - (1.3)
---------------- ------------- -------- -------- ------------ --------- ---------- -------
Revenue for the
year 597.2 308.1 267.0 250.8 53.6 48.6 1,525.3
---------------- ------------- -------- -------- ------------ --------- ---------- -------
Year ended 31 March 2021
Revenue by sector and destination (all continuing
operations)
Restated*
Africa,
Near and
United States Mainland United Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------- -------- -------- ------------ --------- ---------- -------
Safety 143.7 170.8 124.9 90.9 34.1 22.6 587.0
Environmental
& Analysis 165.1 44.2 70.1 65.9 9.2 6.6 361.1
Medical 200.6 61.0 19.2 59.3 10.8 20.4 371.3
Inter-segmental
sales (0.6) - (0.6) - - - (1.2)
---------------- ------------- -------- -------- ------------ --------- ---------- -------
Revenue for the
year 508.8 276.0 213.6 216.1 54.1 49.6 1,318.2
---------------- ------------- -------- -------- ------------ --------- ---------- -------
Inter-segmental sales are charged at prevailing market prices
and have not been disclosed separately by segment as they are not
considered material. Revenue derived from the rendering of services
was GBP69.9m (2021: GBP52.6m). All revenue was otherwise derived
from the sale of products.
* Restated to reflect the new reporting segments
Year ended 31 March 2022
Revenue
Revenue recognised
recognised at a point Total
over time in time Revenue
GBPm GBPm GBPm
------------------------- ------------------ --------------- ----------------
Safety 8.2 633.2 641.4
Environmental & Analysis 99.8 343.1 442.9
Medical 49.6 392.7 442.3
Inter-segmental sales - (1.3) (1.3)
------------------------- ------------------ --------------- ----------------
Revenue for the year 157.6 1,367.7 1,525.3
------------------------- ------------------ --------------- ----------------
Year ended 31 March 2021
Restated*
Revenue
Revenue recognised
recognised at a point Total
over time in time Revenue
GBPm GBPm GBPm
-------------------------------------------------
Safety 3.4 583.6 587.0
Environmental & Analysis 69.8 291.3 361.1
Medical 20.6 350.7 371.3
Inter-segmental sales - (1.2) (1.2)
------------------------------------------------- ----------------- ---------------- ---------------
Revenue for the year 93.8 1,224.4 1,318.2
------------------------------------------------- ----------------- ---------------- ---------------
* Restated to reflect the new reporting segments
Year ended 31 March 2022
Revenue
from Revenue
performance from
obligations Revenue performance
entered previously obligations
into and included satisfied
satisfied as in
in the contract previous Total
year liabilities periods Revenue
GBPm GBPm GBPm GBPm
------------------------- ------------ ------------ ------------ --------
Safety 638.1 3.3 - 641.4
Environmental & Analysis 436.3 6.6 - 442.9
Medical 432.8 5.6 3.9 442.3
Inter-segmental sales (1.3) - - (1.3)
------------------------- ------------ ------------ ------------ --------
Revenue for the year 1,505.9 15.5 3.9 1,525.3
------------------------- ------------ ------------ ------------ --------
Year ended 31 March 2021
Restated*
Revenue
from Revenue
performance from
obligations Revenue performance
entered previously obligations
into and included satisfied
satisfied as in
in the contract previous Total
year liabilities periods Revenue
GBPm GBPm GBPm GBPm
-------------------------
Safety 585.6 1.4 - 587.0
Environmental & Analysis 354.4 6.7 - 361.1
Medical 365.8 5.2 0.3 371.3
Inter-segmental sales (1.2) - - (1.2)
------------------------- ------------ ------------ ------------ --------
Revenue for the year 1,304.6 13.3 0.3 1,318.2
------------------------- ------------ ------------ ------------ --------
* Restated to reflect the new reporting segments
The Group has unsatisfied (or partially satisfied) performance
obligations at the balance sheet date with an aggregate amount of
transaction price as follows. The time bands represented present
the expected timing of when the remaining transaction price will be
recognised as revenue.
Aggregate transaction price allocated to unsatisfied performance
obligations
31 March
2022 Recognised Recognised Recognised
Total < 1 year 1-2 years > 2 years
GBPm GBPm GBPm GBPm
------------------------- -------- ---------- ---------- ----------
Safety 27.0 15.2 4.5 7.3
Environmental & Analysis 15.3 7.0 3.4 4.9
Medical 14.4 12.9 1.5 -
Inter-segmental sales - - - -
------------------------- -------- ---------- ---------- ----------
Total 56.7 35.1 9.4 12.2
------------------------- -------- ---------- ---------- ----------
Aggregate transaction price allocated to unsatisfied performance
obligations
Restated*
31 March
2021 Recognised Recognised Recognised
Total < 1 year 1-2 years > 2 years
GBPm GBPm GBPm GBPm
------------------------- -------- ---------- ---------- ----------
Safety 18.0 13.3 0.5 4.2
Environmental & Analysis 15.6 6.6 3.0 6.0
Medical 6.7 6.3 0.4 -
Inter-segmental sales - - - -
------------------------- -------- ---------- ---------- ----------
Total 40.3 26.2 3.9 10.2
------------------------- -------- ---------- ---------- ----------
* Restated to reflect the new reporting segments
Segment results
Profit (all continuing operations)
Year ended Year ended
31 March 31 March
2022 2021
Restated**
GBPm GBPm
-------------------------------------------------------- ----------------- -----------------------
Segment profit before allocation of adjustments* Safety
Environmental & Analysis 146.2 135.3
Medical 109.8 89.3
99.5 86.6
-------------------------------------------------------- ----------------- -----------------------
355.5 311.2
-------------------------------------------------------- ----------------- -----------------------
Segment profit after allocation of adjustments*
Safety 163.5 117.3
Environmental & Analysis 96.9 101.7
Medical 83.3 66.8
-------------------------------------------------------- ----------------- -----------------------
Segment profit 343.7 285.8
Central administration costs (30.9) (22.9)
Net finance expense (8.4) (10.0)
-------------------------------------------------------- ----------------- -----------------------
Group profit before taxation 304.4 252.9
Taxation (60.2) (49.6)
-------------------------------------------------------- ----------------- -----------------------
Profit for the year 244.2 203.3
-------------------------------------------------------- ----------------- -----------------------
* Adjustments include the amortisation of acquired intangible
assets; acquisition items; and significant restructuring costs and
profit or loss on disposal of operations. Note 3 provides more
information on alternative performance measures.
** Restated to reflect the new reporting segments.
Acquisition transaction costs, adjustments to contingent
consideration and release of fair value adjustments to inventory
(collectively 'acquisition items') are recognised in the
Consolidated Income Statement. Segment profit, before these
acquisition items and the other adjustments, is disclosed
separately above as this is the measure reported to the Group Chief
Executive for the purpose of allocation of resources and assessment
of segment performance. These adjustments are analysed as
follows:
Year ended 31 March 2022
Acquisition
items
-------------------- ------------- ----------- -------------- -------------------------------
Release
of Total Disposal
fair amortisation of
Amortisation value charge operations
of acquired Adjustments adjustments and and
intangible Transaction to contingent to acquisition restructuring
assets Costs consideration inventory items (note 9) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------- ----------- -------------- ----------- ------------ ---------------- ----------
Safety (14.9) (0.5) - (1.3) (16.7) 34.0 17.3
Environmental &
Analysis (10.3) (1.6) 0.1 (1.1) (12.9) - (12.9)
Medical (17.5) (2.1) 4.4 (1.0) (16.2) - (16.2)
-------------------- ------------- ----------- -------------- ----------- ------------ ---------------- ----------
Total Segment &
Group (42.7) (4.2) 4.5 (3.4) (45.8) 34.0 (11.8)
-------------------- ------------- ----------- -------------- ----------- ------------ ---------------- ----------
The transaction costs arose mainly on the acquisitions during
the year. In Safety, they related to the acquisition of Ramtech
(GBP0.4m) and IBIT (GBP0.1m). In Environmental & Analysis, they
related to the acquisition of Dancutter (GBP0.3m), Sensitron
(GBP0.4m), Orca (GBP0.1m), Anton (GBP0.1m) and ILT (GBP0.2m) in the
current year and Deep Trekker (GBP0.5m) that was acquired in April
2022. In Medical, they related to the acquisition of PeriGen
(GBP1.4m), Infinite Leap (GBP0.3m), Clayborn Lab (GBP0.1m),
Meditech (GBP0.1m) and RNK (GBP0.1m), in the current year and the
acquisition of Visiometrics in a previous year (GBP0.1m).
The GBP4.5m adjustment to contingent consideration comprised of
a credit of GBP0.1m in Environmental & Analysis arising from a
decrease in the estimate of the payables for Invenio (GBP0.3m)
offset by an increase in the estimate of the payable for Orca
(GBP0.2m) and a credit of GBP4.4m in Medical arising from a
decrease in estimates of the payables for NovaBone (GBP1.3m),
NeoMedix (GBP3.0m) and Spreo (GBP0.1m) partially offset by an
increase in the estimate of the payable for Infowave (GBP0.3m) and
a credit of GBP0.3m arising from exchange differences on balances
denominated in Euros.
The GBP3.4m release of fair value adjustments to inventory
related to Ramtech (GBP1.3m) in Safety; Dancutter (GBP0.1m), Orca
(GBP0.6m) Sensitron (GBP0.2m) and ILT (GBP0.2m) in Environmental
& Analysis; and Meditech (GBP1.0m) in Medical. All amounts have
been released in relation to Dancutter, Ramtech, Orca and
Sensitron.
Year ended 31 March 2021
Restated*
Acquisition items
------------------------------------------
Disposal
Total of
Release amortisation operations
Amortisation of charge and
of acquired Adjustments fair value and restructuring
intangible Transaction to contingent adjustments acquisition (note
assets Costs consideration to inventory items 9) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------------- ----------- -------------- ------------- ------------- ---------------- ------
Safety (15.6) - (2.4) - (18.0) - (18.0)
Environmental &
Analysis (10.2) - 1.3 (0.8) (9.7) 22.1 12.4
Medical (16.5) (1.9) 0.4 (1.8) (19.8) - (19.8)
----------------- -------------- ----------- -------------- ------------- ------------- ---------------- ------
Total Segment &
Group (42.3) (1.9) (0.7) (2.6) (47.5) 22.1 (25.4)
----------------- -------------- ----------- -------------- ------------- ------------- ---------------- ------
* Restated to reflect the new reporting segments
In the prior year, the transaction costs arose on the
acquisition of Static Systems (GBP0.5m) during the year and costs
relating to Visiometrics (GBP1.4m), both in the Medical sector.
The GBP0.7m adjustment to contingent consideration comprised: a
charge of GBP2.4m in Safety arising from an increase in the
estimate of the payables for Navtech (GBP1.5m) and FireMate
(GBP0.9m); a credit of GBP1.3m in Environmental & Analysis
arising from a decrease in estimate of the payables for Invenio
(GBP0.8m) and Enoveo (GBP0.5m), and a credit of GBP0.4m in Medical
arising from a decrease in the estimated payable for NeoMedix
(GBP1.7m), offset by an increase in estimate of the payable for
Infowave (GBP0.9m) and Spreo (GBP0.2m), and a charge of GBP0.2m
arising from exchange differences on balances denominated in
Euros.
The GBP2.6m release of fair value adjustments to inventory
relates to Sensit (GBP0.8m) in Environmental & Analysis and
NovaBone (GBP1.3m), Maxtec (GBP0.2m) and Static Systems (GBP0.3m)
in Medical. As at the prior year end all amounts had been released
in relation to Sensit, NovaBone, Maxtec and Static Systems.
Information about major customers
No single customer accounts for more than 10% (2021: 10%) of the
Group's revenue.
2 Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing the
net profit for the year attributable to the equity shareholders of
the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to the ordinary equity shareholders of
the parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
Adjusted earnings are calculated as earnings from continuing
operations excluding the amortisation of acquired intangible
assets; acquisition items; profit or loss on disposal of operations
and the associated taxation thereon and in the current year the
increase in the UK's corporation tax rate from 19% to 25%. The
Directors consider that adjusted earnings, which constitute an
alternative performance measure, represent a more consistent
measure of underlying performance as it excludes amounts not
directly linked with trading. A reconciliation of earnings and the
effect on basic and diluted earnings per share figures is as
follows:
Basic earnings per share
Per ordinary share
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
GBPm GBPm pence pence
------------------------------------------------- ---------- ---------- ---------- ----------
Earnings from continuing operations attributable
to owners of the parent 244.4 203.4 64.54 53.61
Amortisation of acquired intangible assets
(after tax) 33.1 32.0 8.73 8.44
Acquisition transaction costs (after tax) 3.8 1.6 0.99 0.43
Adjustments to contingent consideration
(after tax) (4.5) 0.7 (1.19) 0.20
Release of fair value adjustments to inventory
(after tax) 2.6 2.0 0.70 0.52
Disposal of operations and restructuring
(after tax) (34.0) (17.1) (8.98) (4.53)
Impact of UK rate change 2.6 - 0.69 -
------------------------------------------------- ---------- ---------- ---------- ----------
Adjusted earnings attributable to owners
of the parent 248.0 222.6 65.48 58.67
------------------------------------------------- ---------- ---------- ---------- ----------
Weighted average number of ordinary shares
in issue for basic earnings per share, million 378.7 379.2
------------------------------------------------- ---------- ---------- ---------- ----------
Diluted earnings per ordinary share
Per ordinary
share
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
GBPm GBPm pence pence
------------------------------------------------- ---------- ----------
Earnings from continuing operations attributable
to owners of the parent 244.4 203.4 64.42 53.50
------------------------------------------------- ---------- ---------- ---------- ------------
Weighted average number of ordinary shares
in issue for basic earnings per share, million 378.7 379.2
------------------------------------------------- ---------- ---------- ---------- ------------
Dilutive potential ordinary shares - share
awards, million 0.7 0.8
------------------------------------------------- ---------- ---------- ---------- ------------
Weighted average number of ordinary shares
in issue for diluted earnings per share,
million 379.4 380.0
------------------------------------------------- ---------- ---------- ---------- ------------
3 Alternative performance measures
The Board uses certain alternative performance measures to help
it effectively monitor the performance of the Group. The Directors
consider that these represent a more consistent measure of
underlying performance by removing non-trading items that are not
closely related to the Group's trading or operating cash flows.
These measures include Return on Total Invested Capital (ROTIC),
Return on Capital Employed (ROCE), Organic growth at constant
currency, Adjusted operating profit and Adjusted operating cash
flow. Note 1 provides further analysis of the adjusting items in
reaching adjusted profit measures.
Return on Total Invested Capital
31 March 31 March
2022 2021
GBPm GBPm
---------------------- ------------ --------
Profit 244.2 203.3
after
tax
A 3.7 19.2
d
j
u
s
t
m
e
n
t
s
1
---------------------- ------------ --------
Adjusted
profit
after
t
a
x
1 247.9 222.5
---------------------- ------------ --------
Total
equity 1,403.1 1,167.6
(Less)/add
back
net
retirement
benefit
(assets)/obligations (30.5) 22.5
Deferred
tax
(liabilities)/assets
on
retirement
benefits 7.7 (4.0)
Investment
fair
value
adjustments
through
other
comprehensive
income 1.7 -
Cumulative
amortisation
of
acquired
intangible
assets 345.7 297.2
Historical
adjustments
to
goodwill
2 89.5 89.5
---------------------- ------------ --------
Total
Invested
Capital 1,817.2 1,572.8
---------------------- ------------ --------
Average
Total
Invested
Capital
3 1,695.0 1,543.7
---------------------- ------------ --------
Return
on
Total
Invested
Capital
(ROTIC)
4 14.6% 14.4%
---------------------- ------------ --------
Return on Capital Employed
31 March 31 March
2022 2021
GBPm GBPm
------------------------------------------------------- ----------- --------
Profit before tax 304.4 252.9
Adjustments(1) 11.8 25.4
Net finance costs 8.4 10.0
Lease interest (2.3) (2.3)
------------------------------------------------------- ----------- --------
Adjusted operating profit (1) after share of results
of associates and lease interest 322.3 286.0
------------------------------------------------------- ----------- --------
Computer software costs within intangible assets 4.2 6.0
Capitalised development costs within intangible assets 41.7 38.9
Other intangibles within intangible assets 3.6 3.4
Property, plant and equipment 194.0 180.8
Inventories 228.8 167.8
Trade and other receivables 325.1 268.0
Current trade and other payables (242.7) (186.7)
Current lease liabilities (15.5) (13.3)
Current provisions (20.7) (35.4)
Net tax receivable 3.8 7.5
Non-current trade and other payables (19.0) (16.8)
Non-current provisions (7.7) (8.4)
Non-current lease liabilities (56.6) (51.7)
Add back contingent purchase consideration 15.2 29.4
------------------------------------------------------- ----------- --------
Capital Employed 454.2 389.5
------------------------------------------------------- ----------- --------
Average Capital Employed(3) 421.9 403.2
------------------------------------------------------- ----------- --------
Return on Capital Employed (ROCE) 4 76.4% 70.9%
------------------------------------------------------- ----------- --------
1 Adjustments include the amortisation of acquired intangible
assets; acquisition items; and significant restructuring costs and
profit or loss on disposal of operations. Where after-tax measures,
these also include the associated taxation on adjusting items. Note
1 provides more information on these items.
2 Includes goodwill amortised prior to 3 April 2004 and goodwill
taken to reserves.
3 The ROTIC and ROCE measures are expressed as a percentage of
the average of the current and prior year's Total Invested Capital
and Capital Employed respectively. Using an average as the
denominator is considered to be more representative. The 1 April
2020 Total Invested Capital and Capital Employed balances were
GBP1,514.6m and GBP416.9m respectively.
4 The ROTIC and ROCE measures are calculated as Adjusted profit
after tax divided by Average Total Invested Capital and Adjusted
operating profit after share of results of associates and lease
interest divided
by Average Capital Employed respectively.
Organic growth at constant currency
Organic growth measures the change in revenue and profit from
continuing Group operations. This measure equalises the effect of
acquisitions by:
a. removing from the year of acquisition their entire revenue
and profit before taxation;
b. in the following year, removing the revenue and profit for
the number of months equivalent to the pre-acquisition period in
the prior year; and
c. removing from the year prior to acquisition, any revenue
generated by sales to the acquired company which would have been
eliminated on consolidation had the acquired company been owned for
that period.
The results of disposals are removed from the prior period
reported revenue and profit before taxation.
Constant currency measures the change in revenue and profit
excluding the effects of currency movements. The measure restates
the current year's revenue and profit at last year's exchange
rates.
Organic growth at constant currency has been calculated for the
Group as follows:
Group
Adjusted* profit before
Revenue taxation
---------- ---------- -------- --------------------------------
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ---------- ---------- -------- ---------- ---------- --------
Continuing operations 1,525.3 1,318.2 15.7% 316.2 278.3 13.6%
Acquired and disposed revenue/profit (63.5) (37.4) (9.9) (4.6)
===================================== ========== ========== ======== ========== ========== ========
Organic growth 1,461.8 1,280.8 14.1% 306.3 273.7 11.9%
Constant currency adjustment 42.1 - 9.5 -
------------------------------------- ---------- ---------- -------- ---------- ---------- --------
Organic growth at constant
currency 1,503.9 1,280.8 17.4% 315.8 273.7 15.4%
------------------------------------- ---------- ---------- -------- ---------- ---------- --------
Sector Organic growth at constant currency
Organic growth at constant currency is calculated for each
segment using the same method as described above.
Safety
Adjusted* segment
Revenue profit
------------------------------------ ---------- ----------- -------- ---------------------------------------------
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
Restated** Restated**
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------ ---------- ----------- -------- ---------- ----------------------- --------
Continuing operations 641.4 587.0 9.3% 146.2 135.3 8.1%
Acquisition and currency adjustments 7.2 (27.2) 2.4 (4.1)
------------------------------------ ---------- ----------- -------- ---------- ----------------------- --------
Organic growth at constant
currency 648.6 559.8 15.9% 148.6 131.2 13.3%
------------------------------------ ---------- ----------- -------- ---------- ----------------------- --------
Environmental & Analysis
Adjusted* segment
Revenue profit
------------------------------------ ---------- ----------- -------- ---------------------------------------------
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
Restated** Restated**
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------ ---------- ----------- -------- ---------- ----------------------- --------
Continuing operations 442.9 361.1 22.6% 109.8 89.3 23.0%
Acquisition and currency adjustments (6.0) (10.2) (0.4) (0.5)
------------------------------------ ---------- ----------- -------- ---------- ----------------------- --------
Organic growth at constant
currency 436.9 350.9 24.5% 109.4 88.8 23.3%
------------------------------------ ---------- ----------- -------- ---------- ----------------------- --------
Medical
Adjusted* segment
Revenue profit
------------------------------------- ---------- ---------- -------- --------------------------------------------
Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2021 2022 2021
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ---------- ---------- -------- ---------- ---------------------- --------
Continuing operations 442.3 371.3 19.1% 99.5 86.6 15.0%
Acquisition and currency adjustments (22.6) - (3.9) -
------------------------------------- ---------- ---------- -------- ---------- ---------------------- --------
Organic growth at constant
currency 419.7 371.3 13.0% 95.6 86.6 10.5%
------------------------------------- ---------- ---------- -------- ---------- ---------------------- --------
* Adjustments include in the current and prior year the
amortisation of acquired intangible assets; acquisition items and
significant restructuring costs and profit or loss on disposal of
operations.
** Restated to reflect the new reporting segments
Adjusted operating profit
Year ended Year ended
31 March 31 March
2022 2021
GBPm GBPm
------------------------------------------- ---------- ----------
Operating profit 278.9 240.8
Add back:
Acquisition items (note 1) 3.1 5.2
Amortisation of acquired intangible assets 42.7 42.3
------------------------------------------- ---------- ----------
Adjusted operating profit 324.7 288.3
------------------------------------------- ---------- ----------
Adjusted operating cash flow
Year ended Year ended
31 March 31 March
2022 2021
GBPm GBPm
----------------------------------------------------------- ------------ ----------
Net cash from operating activities 237.4 277.6
Add back:
Net acquisition costs paid 4.1 2.4
Taxes paid 56.0 53.8
Proceeds from sale of property, plant and equipment and
capitalised development costs 1.1 0.9
Share awards vested not settled by own shares 7.1 7.8
Deferred consideration paid in excess of payable estimated
on acquisition 7.5 -
Less:
Purchase of property, plant and equipment (excluding Right
of use assets) (25.2) (22.8)
Purchase of computer software and other intangibles (1.4) (4.0)
Development costs capitalised (13.4) (15.4)
----------------------------------------------------------- ------------ ----------
Adjusted operating cash flow 273.2 300.3
----------------------------------------------------------- ------------ ----------
Cash conversion % (adjusted operating cash flow/adjusted
operating profit) 84% 104%
----------------------------------------------------------- ------------ ----------
4 Finance income
Year Year ended
ended 31 March
31 March 2021
2022 GBPm
GBPm
--------------------------------------------------------- ------------- ---------------
Interest receivable 0.2 0.8
Net interest credit on pension plan liabilities - 0.1
Fair value movement on derivative financial instruments 0.4 0.1
--------------------------------------------------------- ------------- ---------------
0.6 1.0
--------------------------------------------------------- ------------- ---------------
5 Finance expense
Year Year ended
ended 31 March
31 March 2021
2022 GBPm
GBPm
-------------------------------------------------------- ------------- --------------
Interest payable on borrowings 5.6 7.7
Interest payable on lease obligations 2.3 2.3
Amortisation of finance costs 0.7 0.7
Net interest charge on pension plan liabilities 0.3 -
Other interest payable 0.1 0.1
-------------------------------------------------------- ------------- --------------
9.0 10.8
Fair value movement on derivative financial instruments - 0.2
-------------------------------------------------------- ------------- --------------
9.0 11.0
-------------------------------------------------------- ------------- --------------
6 Taxation
Recognised in the Consolidated Income Statement
Year Year ended
ended 31 March
31 March 2021
2022 GBPm
GBPm
--------------------------------------------------------- ------------- --------------
Current tax
UK corporation tax at 19% (2021: 19%) 16.7 11.5
Overseas taxation 46.0 40.7
Adjustments in respect of prior years 0.5 1.7
--------------------------------------------------------- ------------- --------------
Total current tax charge 63.2 53.9
--------------------------------------------------------- ------------- --------------
Deferred tax
Origination and reversal of timing differences (5.7) (4.4)
Adjustments in respect of prior years 0.1 0.1
Changes in tax rates - UK 2.6 -
--------------------------------------------------------- ------------- --------------
Total deferred tax credit (3.0) (4.3)
--------------------------------------------------------- ------------- --------------
Total tax charge recognised in the Consolidated Income
Statement 60.2 49.6
--------------------------------------------------------- ------------- --------------
Reconciliation of the effective tax rate:
Profit before tax 304.4 252.9
Tax at the UK corporation tax rate of 19% (2021: 19%) 57.8 48.1
Profit on disposal of business (6.5) -
Overseas tax rate differences 6.2 6.3
Effect of intra-group financing - (6.5)
Tax incentives, exemptions and credits (including patent
box, R&D and High-Tech status) (4.2) (4.4)
Changes in tax rates - UK 2.6 -
Permanent differences 3.7 4.3
Adjustments in respect of prior years 0.6 1.8
--------------------------------------------------------- ------------- --------------
Total tax charge recognised in the Consolidated Income
Statement 60.2 49.6
--------------------------------------------------------- ------------- --------------
Effective tax rate 19.8% 19.6%
--------------------------------------------------------- ------------- --------------
Year ended Year ended
31 March 31 March
2022 2021
GBPm GBPm
-------------------------------------
Adjusted* profit before tax 316.2 278.3
Total tax charge on adjusted* profit 68.3 55.8
------------------------------------- -------------- ------------
Effective tax rate 21.6% 20.1%
------------------------------------- -------------- ------------
* Adjustments include the amortisation of acquired intangible
assets, acquisition items, significant restructuring costs and
profit or loss on disposal of operations. Note 3 provides more
information on alternative performance measures.
The Group's future Effective Tax Rate (ETR) will mainly depend
on the geographic mix of profits and whether there are any changes
to tax legislation in the Group's most significant countries of
operations. The Finance Bill 2021 received Royal Assent on 10 June
2021 and included the increase in the UK corporation tax rate from
19% to 25% from 1 April 2023. Accordingly, our UK deferred tax
balances have been restated to 25%, resulting in a GBP2.6m charge
to the profit and loss account, included as an adjusting item .
Recognised in the Consolidated Statement of Comprehensive Income
and Expenditure
Year ended Year ended
31 March 31 March
2022 2021
GBPm GBPm
--------------------------------------------------------- -------------- ------------
Current tax
Retirement benefit obligations Deferred tax (2.3) (2.5)
Retirement benefit obligations
Effective portion of changes in fair value of cash flow 11.9 (3.4)
hedges
(0.4) 0.2
--------------------------------------------------------- -------------- ------------
9.2 (5.7)
--------------------------------------------------------- -------------- ------------
Recognised directly in equity
Year ended Year ended
31 March 31 March
2022 2021
GBPm GBPm
------------------------------------------------------- -------------- ------------
Current tax
Excess tax deductions related to share-based payments
on exercised awards
Deferred tax (1.3) (1.6)
Change in estimated excess tax deductions related to
share-based payments 0.2 0.4
------------------------------------------------------- -------------- ------------
(1.1) (1.2)
------------------------------------------------------- -------------- ------------
7 Dividends
Per ordinary share
Year Year ended Year Year ended
ended 31 March ended 31 March
31 March 2021 31 March 2021
2022 pence 2022 GBPm
pence GBPm
---------------------------------------------- ------------- -------------- ------------- --------------
Amounts recognised as distributions to
shareholders in the year
Final dividend for the year ended 31 March 10.78 9.96 40.8 37.7
2021 (31 March 2020)
Interim dividend for the year ended 31 March 7.35 6.87 27.9 26.0
2022 (31 March 2021)
---------------------------------------------- ------------- -------------- ------------- --------------
18.13 16.83 68.7 63.7
---------------------------------------------- ------------- -------------- ------------- --------------
Dividends declared in respect of the year
Interim dividend for the year ended 31 March
2022 (31 March 2021) 7.35 6.87 27.9 26.0
Proposed final dividend for the year ended
31 March 2022 (31 March 2021) 11.53 10.78 43.6 40.8
---------------------------------------------- ------------- -------------- ------------- --------------
18.88 17.65 71.5 66.8
---------------------------------------------- ------------- -------------- ------------- --------------
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting on 21 July 2022 and has
not been included as a liability in these financial statements.
8 Acquisitions
In accounting for acquisitions, adjustments are made to the book
values of the net assets of the companies acquired to reflect their
fair values to the Group. Other previously unrecognised assets and
liabilities at acquisition are included and accounting policies are
aligned with those of the Group where appropriate.
During the year ended 31 March 2022, the Group made 13
acquisitions namely:
- Dancutter A/S;
- Orca GmbH;
- PeriGen, Inc.;
- Ramtech Electronics Limited;
- Sensitron S.R.L.;
- Infinite Leap Inc.;
- International Light Technologies Inc.;
- Meditech Kft;
- Anton Industrial Services Limited;
- Certain trade and assets of FluidSentry Pty;
- Certain trade and assets of RNK Products Inc.;
- Certain trade and assets of IBIT S.R.L.;
- Certain trade and assets of Clayborn Lab.
Set out on the following pages are summaries of the assets
acquired and liabilities assumed and the purchase consideration
of:
a) the total of acquisitions;
b) Dancutter A/S;
c) Orca GmbH;
d) PeriGen, Inc.;
e) Ramtech Electronics Limited;
f) Sensitron S.R.L.;
g) Infinite Leap Inc.;
h) International Light Technologies Inc.;
i) Other acquisitions.
Due to their contractual dates, the fair value of receivables
acquired (shown below) approximate to the gross contractual amounts
receivable. The amount of gross contractual receivables not
expected to be recovered is immaterial.
There are no material contingent liabilities recognised in
accordance with paragraph 23 of IFRS 3 (revised).
The acquisitions contributed GBP39.9m of revenue and GBP7.4m of
profit after tax for year ended 31 March 2022.
If these acquisitions had been held since the start of the
financial year, it is estimated that the Group's reported revenue
and profit after tax would have been GBP23.0m and GBP3.3m higher
respectively.
As at the date of approval of the financial statements, the
accounting for all current year acquisitions is provisional;
relating to finalisation of the valuation of acquired intangible
assets, the initial consideration, which is subject to agreement of
certain contractual adjustments, and certain other provisional
balances.
a) Total of acquisitions
Total
GBPm
----------------------------------------------------------------- -------
Non-current assets
Intangible assets 67.8
Property, plant and equipment 8.2
Deferred tax 5.3
Current assets
Inventories 10.0
Trade and other receivables 15.5
Tax 0.4
Cash and cash equivalents 18.2
----------------------------------------------------------------- -------
Total assets 125.4
----------------------------------------------------------------- -------
Current liabilities
Payables (19.3)
Borrowings and lease liabilities (0.7)
Provisions (0.2)
Tax (0.8)
Non-current liabilities
Borrowings and lease liabilities (3.9)
Deferred tax (12.3)
----------------------------------------------------------------- -------
Total liabilities (37.2)
----------------------------------------------------------------- -------
Net assets of businesses acquired 88.2
----------------------------------------------------------------- -------
Initial cash consideration paid 151.2
Other adjustments 13.1
Other amounts to be paid 0.3
Contingent purchase consideration including retentions estimated
to be paid 3.8
----------------------------------------------------------------- -------
Total consideration 168.4
----------------------------------------------------------------- -------
Total goodwill 80.2
----------------------------------------------------------------- -------
Analysis of cash outflow in the Consolidated Cash Flow
Statement
Year Year ended
ended 31 March
31 March 2021
2022 GBPm
GBPm
------------------------------------------------------- ------------- ------------
Initial cash consideration paid 151.2 37.0
Cash acquired on acquisitions (18.2) (7.9)
Initial cash consideration adjustment on current year
acquisitions 13.1 6.9
Contingent consideration paid and loan notes repaid in
cash in relation to prior year acquisitions 14.2 10.4
------------------------------------------------------- ------------- ------------
Net cash outflow relating to acquisitions 160.3 46.4
------------------------------------------------------- ------------- ------------
Included in cash flows from operating activities 7.5 -
Included in cash flows from investing activities 152.8 46.4
------------------------------------------------------- ------------- ------------
Contingent consideration included in cash flows from operating
activities reflect amounts paid in excess of that estimated in the
acquisition balance sheets.
b) Dancutter A/S
GBPm
---------------------------------- ------
Non-current assets
Intangible assets 8.8
Property, plant and equipment 1.3
Current assets
Inventories 0.5
Trade and other receivables 0.5
Cash and cash equivalents 0.9
---------------------------------- ------
Total assets 12.0
---------------------------------- ------
Current liabilities
Payables (0.5)
Borrowings and lease liabilities (0.1)
Provisions (0.1)
Tax (0.1)
Non-current liabilities
Borrowings and lease liabilities (1.1)
Deferred tax (1.9)
---------------------------------- ------
Total liabilities (3.8)
---------------------------------- ------
Net assets of businesses acquired 8.2
---------------------------------- ------
Initial cash consideration paid 15.0
Other adjustments 0.5
Retention amount 0.4
---------------------------------- ------
Total consideration 15.9
---------------------------------- ------
Total goodwill 7.7
---------------------------------- ------
On 24 June 2021, the Group acquired the entire share capital of
Dancutter A/S and Repipe Lining Systems A/S (together 'Dancutter')
for consideration of EUR18.1m (GBP15.5m), which comprised the
purchase price of EUR18.0m (GBP15.4m) plus net cash/(debt)
adjustments of EUR0.6m (GBP0.5m) less a retention amount of EUR0.5m
(GBP0.4m). The retention amount, held in place of escrow balances,
is due 18 months from the date of acquisition. There is no
contingent consideration payable. The maximum total cash
consideration, excluding cash and debt acquired, is GBP15.0m.
Dancutter, located in Denmark, is a designer and manufacturer of
trenchless pipeline rehabilitation equipment. This is used to
maintain and extend the life of wastewater networks, reducing
blockages and leakage and ultimately reducing environmental
contamination. Dancutter will be managed as part of Halma's MiniCam
business and will become part of Halma's Environmental &
Analysis sector. Key members of Dancutter's leadership team will
remain with the business and it will continue to operate in its
current facility.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by customer
related intangibles of GBP6.4m; trade name of GBP0.7m and
technology related intangibles of GBP1.7m; with residual goodwill
arising of GBP7.7m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Dancutter contributed GBP2.7m of revenue and GBP0.4m of profit
after tax for the year ended 31 March 2022. If this acquisition had
been held since the start of the financial year, it is estimated
that the Group's reported revenue and profit after tax would have
been GBP1.1m higher and GBP0.2m higher respectively.
Acquisition costs totalling GBP0.3m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be
deductible for tax purposes.
c) Orca GmbH
GBPm
------------------------------------------------------- -----
Non-current assets
Intangible assets 2.4
Property, plant and equipment 0.1
Current assets
Inventories 1.1
Trade and other receivables 0.4
Cash and cash equivalents 1.0
------------------------------------------------------- -----
Total assets 5.0
------------------------------------------------------- -----
Current liabilities
Payables (0.2)
Tax (0.5)
Non-current liabilities
Deferred tax (0.9)
------------------------------------------------------- -----
Total liabilities (1.6)
------------------------------------------------------- -----
Net assets of business acquired 3.4
------------------------------------------------------- -----
Initial cash consideration paid 5.4
Other adjustments 0.5
Contingent purchase consideration estimated to be paid 0.4
------------------------------------------------------- -----
Total consideration 6.3
------------------------------------------------------- -----
Total goodwill 2.9
------------------------------------------------------- -----
On 3 May 2021, the Group acquired the entire share capital of
Orca GmbH ('Orca'), for EUR6.8m (GBP5.9m), which comprised the
purchase price of EUR6.2m (GBP5.4m) plus net cash/(debt)
adjustments of EUR0.6m (GBP0.5m). The maximum contingent
consideration payable is EUR2.5m (GBP2.1m) based on profit-based
targets for the years ending 31 March 2022, 31 March 2023 and 31
March 2024. The maximum total consideration, excluding cash and
debt acquired, is GBP7.0m.
Orca is a German manufacturer of ultraviolet disinfection
systems, primarily for the food and beverage sector. Orca has
joined the Group as part of UV Group, part of the Group's
Environmental & Analysis sector.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by customer
related intangibles of GBP0.7m; trade name of GBP0.1m and
technology related intangibles of GBP1.6m; with residual goodwill
arising of GBP2.9m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Orca contributed GBP2.7m of revenue and GBP0.5m of profit after
tax for the year ended 31 March 2022. If this acquisition had been
held since the start of the financial year, it is estimated that
the Group's reported revenue and profit after tax would have been
GBP0.3m and GBP0.1m higher respectively. .
Acquisition costs totalling GBP0.1m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on the Orca acquisition is not expected to
be deductible for tax purposes.
d) PeriGen, Inc.
GBPm
---------------------------------- ------
Non-current assets
Intangible assets 16.5
Property, plant and equipment 2.0
Deferred tax 5.0
Current assets
Inventories 0.2
Trade and other receivables 5.2
Tax 0.4
Cash and cash equivalents 6.2
---------------------------------- ------
Total assets 35.5
---------------------------------- ------
Current liabilities
Payables (8.3)
Borrowings and lease liabilities (0.3)
Non-current liabilities
Borrowings and lease liabilities (1.6)
Deferred tax (4.3)
---------------------------------- ------
Total liabilities (14.5)
---------------------------------- ------
Net assets of businesses acquired 21.0
---------------------------------- ------
Initial cash consideration paid 40.6
Other adjustments 5.4
Other amounts to be paid 0.3
---------------------------------- ------
Total consideration 46.3
---------------------------------- ------
Total goodwill 25.3
---------------------------------- ------
On 27 April 2021, the Group acquired the entire share capital of
PeriGen, Inc., ('PeriGen') for an initial cash consideration of
US$58.0m (GBP40.6m). Additional amounts determined in respect of
working capital adjustments were determined to be US$8.2m
(GBP5.7m). The maximum total consideration, excluding cash and debt
acquired, is GBP40.1m.
PeriGen, based in North Carolina, USA offers innovative
perinatal software solutions, and its advanced technology protects
mothers and their unborn babies by alerting doctors, midwives and
nurses to potential problems during childbirth. The company
continues to run under its own management team and has become part
of the Group's Medical sector.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by customer
related intangibles of GBP6.4m; trade name of GBP1.8m and
technology related intangibles of GBP8.3m; with residual goodwill
arising of GBP25.3m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
PeriGen contributed GBP14.7m of revenue and GBP4.1m of profit
after tax for the year ended 31 March 2022. If this acquisition had
been held since the start of the financial year, it is estimated
that the Group's reported revenue and profit after tax would have
been GBP1.0m and GBP0.2m higher respectively.
Acquisition costs totalling GBP1.4m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on the PeriGen acquisition is not expected
to be deductible for tax purposes.
e) Ramtech Electronics Limited
GBPm
---------------------------------- ------
Non-current assets
Intangible assets 4.6
Property, plant and equipment 1.4
Current assets
Inventories 3.2
Trade and other receivables 1.5
Cash and cash equivalents 3.9
---------------------------------- ------
Total assets 14.6
---------------------------------- ------
Current liabilities
Payables (2.5)
Non-current liabilities
Deferred tax (1.5)
---------------------------------- ------
Total liabilities (4.0)
---------------------------------- ------
Net assets of businesses acquired 10.6
---------------------------------- ------
Initial cash consideration paid 15.5
Other adjustments 4.1
---------------------------------- ------
Total consideration 19.6
---------------------------------- ------
Total goodwill 9.0
---------------------------------- ------
On 29 July 2021, the Group acquired the Ramtech group of
companies ('Ramtech'), for an initial cash consideration of
GBP15.5m, adjustable for cash acquired. Additional amounts paid in
respect of cash acquired and other adjustments were determined to
be
GBP4.1m. The maximum total consideration, excluding cash and
debt acquired, is GBP15.7m.
Ramtech is headquartered in Nottingham, UK and supplies wireless
fire systems for temporary sites, primarily in the construction and
leisure markets. The company continues to run under its own
management team and has become part of the Group's Safety
sector.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by customer
related intangibles of GBP1.4m; trade name of GBP0.8m and
technology related intangibles of GBP2.4m; with residual goodwill
arising of GBP9.0m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Ramtech contributed GBP7.3m of revenue and GBP0.6m of profit
after tax for the year ended 31 March 2022. If this acquisition had
been held since the start of the financial year, it is estimated
that the Group's reported revenue and profit after tax would have
been GBP3.7m and GBP0.3m higher respectively.
Acquisition costs totalling GBP0.4m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on the Ramtech acquisition is not expected
to be deductible for tax purposes.
f) Sensitron S.R.L.
GBPm
---------------------------------- ------
Non-current assets
Intangible assets 9.5
Property, plant and equipment 0.6
Deferred tax 0.1
Current assets
Inventories 1.4
Trade and other receivables 2.9
Cash and cash equivalents 4.3
---------------------------------- ------
Total assets 18.8
---------------------------------- ------
Current liabilities
Payables (3.4)
Borrowings and lease liabilities (0.1)
Tax (0.1)
Non-current liabilities
Borrowings and lease liabilities (0.3)
Deferred tax (2.7)
---------------------------------- ------
Total liabilities (6.6)
---------------------------------- ------
Net assets of business acquired 12.2
---------------------------------- ------
Initial cash consideration paid 21.4
---------------------------------- ------
Total consideration 21.4
---------------------------------- ------
Total goodwill 9.2
---------------------------------- ------
On 29 July 2021, the Group acquired the entire share capital of
Sensitron S.R.L. ('Sensitron') for a cash consideration of EUR25.0m
(GBP21.4m). The maximum total consideration, excluding cash and
debt acquired, is GBP17.1m.
Sensitron, located in Milan, Italy, is a gas detection company
whose devices, which include detectors for hazardous locations and
for new refrigerant gases, enhance safety by detecting the release
of gases harmful to people and the environment. Sensitron will
continue to run under its own management team and will become part
of Halma's Environmental & Analysis sector.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by customer
related intangibles of GBP4.2m; trade name of GBP1.3m and
technology related intangibles of GBP4.0m; with residual goodwill
arising of GBP9.2m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Sensitron contributed GBP5.9m of revenue and GBP0.8m of profit
after tax for the year ended 31 March 2022. If this acquisition had
been held since the start of the financial year, it is estimated
that the Group's reported revenue and profit after tax would have
been GBP3.5m and GBP0.6m higher respectively.
Acquisition costs totalling GBP0.4m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be
deductible for tax purposes.
g) Infinite Leap Inc.
GBPm
------------------------------------------------------- -------
Non-current assets
Intangible assets 11.9
Deferred tax 0.1
Current assets
Trade and other receivables 3.0
------------------------------------------------------- -------
Total assets 15.0
------------------------------------------------------- -------
Current liabilities
Payables (2.8)
------------------------------------------------------- -------
Total liabilities (2.8)
------------------------------------------------------- -------
Net assets of business acquired 12.2
------------------------------------------------------- -------
Initial cash consideration paid 22.3
Other adjustments 0.6
Contingent purchase consideration estimated to be paid 2.0
------------------------------------------------------- -------
Total consideration 24.9
------------------------------------------------------- -------
Total goodwill 12.7
------------------------------------------------------- -------
On 18 November 2021, the Group acquired the entire share capital
of Infinite Leap Inc. ('Infinite Leap') for an initial cash
consideration of $30.0m (GBP22.3m). The maximum contingent
consideration payable is $17.0m (GBP12.9m) based on profit-based
targets for the financial periods ending 30 September 2022 and 30
September 2023. The maximum total consideration, excluding cash and
debt acquired, is GBP35.8m.
Infinite Leap has joined the Group as part of CenTrak, part of
the Group's Medical sector. Infinite Leap is a healthcare
consulting and services provider for real-time location
technologies, based in Fargo, North Dakota, USA, which is also
developing unique new hardware and software solutions for
applications adjacent to CenTrak's core market.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by customer
related intangibles of GBP10.0m; trade name of GBP0.1m and
technology related intangibles of GBP1.8m; with residual goodwill
arising of GBP12.7m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Infinite Leap contributed GBP1.8m of revenue and GBP0.3m of
profit after tax for the year ended 31 March 2022. If this
acquisition had been held since the start of the financial year, it
is estimated that the Group's reported revenue and profit after tax
would have been GBP2.6m and GBP0.2m higher respectively.
Acquisition costs totalling GBP0.3m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on this acquisition is expected to be
deductible for tax purposes.
h) International Light Technologies Inc.
GBPm
---------------------------------- ------
Non-current assets
Intangible assets 8.4
Property, plant and equipment 1.2
Deferred tax 0.1
Current assets
Inventories 1.4
Trade and other receivables 0.8
---------------------------------- ------
Total assets 11.9
---------------------------------- ------
Current liabilities
Payables (0.7)
Borrowings and lease liabilities (0.2)
Non-current liabilities
Borrowings and lease liabilities (0.9)
---------------------------------- ------
Total liabilities (1.8)
---------------------------------- ------
Net assets of business acquired 10.1
---------------------------------- ------
Initial cash consideration paid 19.6
Other adjustments (0.2)
---------------------------------- ------
Total consideration 19.4
---------------------------------- ------
Total goodwill 9.3
---------------------------------- ------
On 18 February 2022, the Group acquired the entire share capital
of International Light Technologies Inc. ('ILT') for a cash
consideration of $26.6m (GBP19.6m) on a cash and debt free basis.
The maximum total consideration, excluding cash and debt acquired,
is GBP19.4m.
ILT has joined the Group as a subsidiary of Ocean Insight, part
of the Group's Environmental & Analysis sector. ILT, based in
Peabody, Massachusetts, USA, is a leading developer of technical
lighting sources and light measurement systems, which are used in
biomedical, environmental, agricultural, food and beverage, and
industrial applications. The excess of the fair value of the
consideration paid over the fair value of the assets acquired is
represented by customer related intangibles of GBP4.0m; trade name
of GBP0.9m and technology related intangibles of GBP3.5m; with
residual goodwill arising of GBP9.3m. The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
ILT contributed GBP0.9m of revenue and GBP0.2m of profit after
tax for the year ended 31 March 2022. If this acquisition had been
held since the start of the financial year, it is estimated that
the Group's reported revenue and profit after tax would have been
GBP7.6m and GBP1.4m higher respectively.
Acquisition costs totalling GBP0.2m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on this acquisition is expected to be
deductible for tax purposes.
i) Other acquisitions
GBPm
----------------------------------------------------------------- ------
Non-current assets
Intangible assets 5.7
Property, plant and equipment 1.6
Current assets
Inventories 2.2
Trade and other receivables 1.2
Cash and cash equivalents 1.9
----------------------------------------------------------------- ------
Total assets 12.6
----------------------------------------------------------------- ------
Current liabilities
Payables (0.9)
Provisions (0.1)
Tax (0.1)
Non-current liabilities
Deferred tax (1.0)
----------------------------------------------------------------- ------
Total liabilities (2.1)
----------------------------------------------------------------- ------
Net assets of businesses acquired 10.5
----------------------------------------------------------------- ------
Initial cash consideration paid 11.4
Additional amounts paid in respect of cash acquired and
other adjustments 2.2
Contingent purchase consideration including retentions estimated
to be paid 1.0
----------------------------------------------------------------- ------
Total consideration 14.6
----------------------------------------------------------------- ------
Total goodwill 4.1
----------------------------------------------------------------- ------
On 1 April 2021, Fortress Interlocks Pty Limited, an industrial
access control company in the Group's Safety sector, bought the
assets and IP associated with monitored safety valves from
FluidSentry Pty in Australia for consideration of A$0.6m
(GBP0.3m).
On 26 April 2021, Argus Security S.R.L., a fire safety company
in the Group's Safety sector, purchased the trade and assets of its
Italian distributor, IBIT, for consideration of EUR0.6m
(GBP0.5m).
On 30 April 2021, the Group acquired Anton Industrial Services
Limited (Anton), the UK flue gas analyser distribution partner of
Crowcon Detection Instruments Limited, a company in the Group's
Environmental & Analysis sector, for consideration of GBP1.9m,
adjustable for cash acquired. Additional amounts paid in respect of
cash acquired and other adjustments was determined to be GBP1.3m.
The consideration includes a retention amount of GBP0.2m held in
place of escrow balances and is due 18 months from the date of
acquisition. The maximum total consideration, excluding cash and
debt acquired, is GBP1.9m.
On 7 May 2021, Rudolf Riester GmbH, a company in the Group's
Medical sector acquired the trade and assets of RNK, a US-based
digital stethoscope company, for consideration of US$3.0m
(GBP2.1m).
On 1 September 2021, the Group acquired Meditech Kft, a
Hungarian manufacturer of ambulatory blood pressure monitors and
ECG devices, for total consideration of EUR5.6m (GBP4.8m); this
includes an amount paid for working capital adjustments of EUR0.4m
(GBP0.3m). The maximum contingent consideration payable is EUR1.0m
(GBP0.8m) based on profit-based targets for one year post
acquisition. The company has become part of the Group's Medical
sector. The maximum total consideration, excluding cash and debt
acquired, is GBP5.0m.
On 26 October 2021, Perma Pure, a company in the Group's Medical
sector acquired certain trade and assets of Clayborn Lab, a
US-based provider of custom heat tape solutions, for an initial
consideration of US$4.5m (GBP3.3m). The consideration includes a
retention amount of US$0.5m (GBP0.4m) held in place of escrow
balances and is due 15 months from the date of acquisition. The
maximum contingent consideration payable is US$1.5m (GBP1.1m)
determined by revenue-based targets for the years ending 30
September 2022 and 30 September 2023. The maximum total
consideration, excluding cash and debt acquired, is GBP4.4m.
In respect of these acquisitions, the excess of the fair value
of the consideration paid over the fair value of the assets
acquired is represented by customer related intangibles of GBP3.5m;
trade name of GBP0.3m and technology related intangibles of
GBP1.9m; with residual goodwill arising of GBP4.1m.
These acquisitions contributed GBP3.7m of revenue and GBP0.5m of
profit after tax cumulatively for the year ended 31 March 2022. If
these acquisitions had been held since the start of the financial
year, it is estimated that the Group's reported revenue and profit
after tax would have been GBP2.8m and GBP0.3m higher
respectively.
Acquisition costs totalling GBP0.5m were recorded in
administrative expenses in the Consolidated Income Statement.
The goodwill arising on these acquisitions are not expected to
be deductible for tax purposes.
9 Disposal of operations
During the current year the Group recognised a profit on
disposal of operations of GBP34.0m (2021: GBP22.1m), which
comprised the following:
On 10 August 2021, the Group disposed of its entire interest in
Texecom Limited to a third party for proceeds of GBP64.8m. This
transaction resulted in the recognition of a gain in the
Consolidated Income Statement as follows:
GBPm
-------------------------------------- ------
Proceeds of disposal 64.8
Less: net assets on disposal (19.0)
Less: allocation of goodwill disposed (9.0)
Less: costs of disposal (2.8)
-------------------------------------- ------
Profit on disposal 34.0
-------------------------------------- ------
The carrying amounts of assets and liabilities at the date of
the sale were
GBPm
--------------------------------------------- ------
Non-current assets
Intangible assets 0.8
Property, plant and equipment 6.3
Current assets
Inventories 7.3
Trade and other receivables 10.6
Cash and cash equivalents 4.5
--------------------------------------------- ------
Total assets 29.5
--------------------------------------------- ------
Current liabilities
Payables (8.4)
Lease liabilities (0.3)
Non-current liabilities
Lease liabilities and dilapidation provision (1.8)
Total liabilities (10.5)
--------------------------------------------- ------
Net assets of business disposed 19.0
--------------------------------------------- ------
Cash received on disposal of operations in the year of GBP57.5m
comprised proceeds from the sale of Texecom Limited of GBP64.8m,
less GBP4.5m of cash disposed and GBP2.8m of disposal costs.
In the prior year, in December 2020, the Group disposed of its
entire interest in Fiberguide Industries, Inc. to a third party for
sale proceeds of GBP27.6m less disposal costs of GBP1.1m. Disposal
costs of GBP0.4m relating to the spin-out and partial disposal of
OneThird B.V. were also paid.
10 Notes to the Consolidated Cash Flow Statement
Year Year ended
ended 31 March
31 March 2021
2022 GBPm
GBPm
------------------------------------------------------------- ------------- --------------
Reconciliation of profit from operations to net cash
inflow from operating activities:
Profit on continuing operations before finance income
and expense, share of results of associate and profit
on disposal of operations 278.9 240.8
Depreciation and impairment of property, plant and equipment 36.1 37.8
Amortisation and impairment of computer software 2.5 2.8
Amortisation of capitalised development costs and other
intangibles 7.6 8.3
Impairment of capitalised development costs 2.9 1.9
Amortisation of acquired intangible assets 42.7 42.3
Share-based payment expense in excess of amounts paid 5.0 3.7
Payments to defined benefit pension plans net of service
costs (11.7) (13.1)
Loss on sale of property, plant and equipment, capitalised
development costs and computer software 0.8 0.7
------------------------------------------------------------- ------------- --------------
Operating cash flows before movement in working capital 364.8 325.2
Increase in inventories (51.9) (6.7)
(Increase)/decrease in receivables (43.6) 4.3
Increase in payables and provisions 36.1 7.9
Revision to estimate and exchange difference on contingent
consideration payable less amounts paid in
excess of payable estimated on acquisition (12.0) 0.7
------------------------------------------------------------- ------------- --------------
Cash generated from operations 293.4 331.4
Taxation paid (56.0) (53.8)
------------------------------------------------------------- ------------- --------------
Net cash inflow from operating activities 237.4 277.6
------------------------------------------------------------- ------------- --------------
Year Year ended
ended 31 March
31 March 2021
2022 GBPm
GBPm
--------------------------------------------- ------------- --------------
Analysis of cash and cash equivalents
Cash and bank balances 157.4 134.1
Overdrafts (included in current borrowings) (0.7) (3.0)
--------------------------------------------- ------------- --------------
Cash and cash equivalents 156.7 131.1
--------------------------------------------- ------------- --------------
Net Net
31 cash/(debt) (cash)/debt Additions Exchange 31
March Cash acquired disposed and adjustments March
2021 flow GBPm GBPm reclassifications GBPm 2022
GBPm GBPm GBPm GBPm
------------ ------- ------ -------------------- -------------------- ------------------------------- ---------------- -------
Analysis of
net debt
Cash and
bank
balances 134.1 4.8 18.2 (4.5) - 4.8 157.4
Overdrafts (3.0) 2.3 - - - - (0.7)
------------ ------- ------ -------------------- -------------------- ------------------------------- ---------------- -------
Cash and
cash
equivalents 131.1 7.1 18.2 (4.5) - 4.8 156.7
Loans notes
falling
due within
one year - - - - (71.2) - (71.2)
Loan notes
falling
due after
more than
one year (105.3) - - - 71.2 (0.9) (35.0)
Bank loans
falling
due within
one year - - - - (0.6) - (0.6)
Bank loans
falling
due after
more than
one year (217.0) (28.9) - - 0.6 (7.3) (252.6)
Lease
liabilities (65.0) 16.8 (4.6) 2.1 (19.0) (2.4) (72.1)
------------ ------- ------ -------------------- -------------------- ------------------------------- ---------------- -------
Total net
debt (256.2) (5.0) 13.6 (2.4) (19.0) (5.8) (274.8)
------
The net increase in cash and cash equivalents of GBP20.8m
comprised cash inflow of GBP7.1m, cash acquired of GBP18.2m and
cash disposed of GBP4.5m.
During the period, the Group changed the presentation of the
proceeds from and the repayments of bank borrowings in the
Consolidated Cash Flow Statement. In the year ended 31 March 2021,
these were presented as net repayments of GBP7.3m, which has been
updated to proceeds of GBP129.4m and repayments of GBP136.7m.
Reconciliation of movements of the Group's liabilities from
financing activities
Liabilities from financing activities are those for which cash
flows were, or will be, classified as cash flows from financing
activities in the Consolidated Cash Flow Statement.
Trade
and other
Total payables
liabilities falling
from financing due with
Borrowings Leases Overdraft activities one year
GBPm GBPm GBPm GBPm GBPm
At 1 April 2020 419.2 61.5 0.9 481.6 186.7
Cash flows from financing
activities (79.5) (16.4) - (95.9) (7.8)
Acquisition/disposal of
subsidiaries - (1.3) - (1.3) 2.7
Exchange adjustments (17.4) (3.8) - (21.2) (5.2)
Other changes* - 25.0 2.1 27.1 10.3
At 31 March 2021 322.3 65.0 3.0 390.3 186.7
Cash flows from financing activities 28.9 (16.8) - 12.1 (5.9)
Acquisition/disposal of subsidiaries - 2.5 - 2.5 11.7
Exchange adjustments 8.2 2.4 - 10.6 7.3
Other changes* - 19.0 (2.3) 16.7 42.9
--------
At 31 March 2022 359.4 72.1 0.7 432.2 242.7
--------
* Other changes include movements in overdraft which is treated
as cash, interest accruals, reclassifications from non-current to
current liabilities, lease additions and other movements in working
capital balances.
11 Contingent liabilities
Group financing exemptions applicable to UK controlled foreign
companies
On 24 November 2017, the European Commission (EC) published an
opening decision that the United Kingdom controlled foreign company
(CFC) group financing partial exemption (FCPE) constitutes State
Aid. On 2 April 2019, the EC's final decision concluded that the
FCPE rules, as they applied up to 31 December 2018, constitute
State Aid. As previously reported, the Group has benefitted from
the FCPE with the total benefit for the periods from 1 April 2013
to 31 December 2018 being approximately GBP15.4m in respect of
tax.
Appeals had been made by the UK government, the Group and other
UK-based groups to annul the EC decision. The EU General Court
delivered its decision on 8 June 2022. The ruling was in favour of
the European Commission but the UK Government and the taxpayer have
the option to appeal this decision.
Notwithstanding these appeals, under EU law, the UK government
is required to commence collection proceedings. In January 2021,
the Group received a Charging Notice from HM Revenue & Customs
(HMRC) for GBP13.9m assessed for the period from 1 April 2016 to 31
December 2018. The Group has appealed against the notice but as
there is no right of postponement the amount charged was paid in
full in February 2021. In February 2021, the Group received
confirmation from HMRC that it was not a beneficiary of State Aid
for the period from 1 April 2013 to 31 March 2016.
Whilst the EU General Court was in favour of the EC, our
assessment is that there are strong grounds for appeal and we would
expect such appeals to be successful. As a result, we continue to
recognise a receivable of GBP14.7m on the Consolidated Balance
Sheet within non-current assets to reflect the Group's view that
the amount paid will ultimately be recovered.
In April 2021, a Charging Notice for GBP0.8m was received. The
GBP0.8m comprised interest on the GBP13.9m assessment noted above
and the interest was paid in May 2021.
The Group's maximum potential exposure at 31 March 2022 in
respect of recoverability of non-current assets is GBP14.7m (31
March 2021: GBP13.9m).
Other contingent liabilities
The Group has widespread global operations and is consequently a
defendant in legal, tax and customs proceedings incidental to those
operations. In addition, there are contingent liabilities arising
in the normal course of business in respect of indemnities,
warranties and guarantees. These contingent liabilities are not
considered to be unusual or material in the context of the normal
operating activities of the Group. Provisions have been recognised
in accordance with the Group accounting policies where required.
None of these claims are expected to result in a material gain or
loss to the Group.
12 Events subsequent to end of reporting period
On 13 April 2022, the Group acquired the entire share capital of
Deep Trekker Inc. (Deep Trekker), based in Ontario, Canada for a
cash consideration of C$60.0m (GBP36.6m) on a cash and debt free
basis. Deep Trekker is a market-leading manufacturer of remotely
operated underwater robots used for inspection, surveying, analysis
and maintenance. Deep Trekker will be part of Halma's Environmental
& Analysis sector. A detailed purchase price allocation
exercise is currently being performed to calculate the goodwill
arising on acquisition.
In May 2022, the Revolving Credit Facility was refinanced. The
new facility remains at GBP550m and matures in May 2027 with two
one-year extension options. In addition, in May 2022, a new Private
Placement of GBP330m was completed. The issuance consists of
Sterling, Euro, US Dollar and Swiss Franc tranches and matures in
July 2032, with an amortisation profile giving it a seven year
average life.
There were no other known material non-adjusting events which
occurred between the end of the reporting period and prior to the
authorisation of these financial statements on 16 June 2022.
13 Remuneration of key management personnel
The remuneration of the Directors and Executive Board members,
who are the key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24
'Related Party Disclosures'. Further information about the
remuneration of individual Directors is provided in the audited
part of the Annual Remuneration Report in the Annual Report and
Accounts 2022.
Year Year ended
ended 31 March
31 March 2021
2022 GBPm
GBPm
------------- --------------
Wages and salaries 11.9 6.1
Pension costs 0.1 0.1
Share-based payment charge 5.0 4.4
------------- --------------
17.0 10.6
------------- --------------
Cautionary note
These Results contain certain forward-looking statements which
have been made by the Directors in good faith using information
available up until the date they approved the announcement.
Forward-looking statements should be regarded with caution as by
their nature such statements involve risk and uncertainties
relating to events and circumstances that may occur in the future.
Actual results may differ from those expressed in such statements,
depending on the outcome of these uncertain future events.
LEI number: 2138007FRGLUR9KGBT40
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR BKPBKBBKBNAD
(END) Dow Jones Newswires
June 16, 2022 02:00 ET (06:00 GMT)
Halma (LSE:HLMA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Halma (LSE:HLMA)
Historical Stock Chart
From Apr 2023 to Apr 2024